Note 11: Financial Risk Management continued Key Judgements and Estimates Contingent consideration liabilities are valued with reference to our judgement of the expected probability and timing of potential future milestone payments, based upon level 3 inputs under the fair value hierarchy, which is then discounted to a present value using appropriate discount rates with reference to the Group’s incremental borrowing rates. 20 P rior to acquisition close in August 2022, the Group commenced buying Vifor’s shares on-market. These shares were carried at fair value through OCI and the subsequent fair value gain was transferred to retained earnings on acquisition date. Valuation of financial instruments Financial instruments measured and carried at fair value are categorised as follows: • Level 1: Items traded with quoted prices in active markets for identical liabilities • Level 2: Items with significantly observable inputs other than quoted prices in active markets • Level 3: Items with unobservable inputs (not based on observable market data) There were no transfers between Level 1 and Level 2 during the year, or any transfers into Level 3. Financial assets/(liabilities) measured at fair value 2023 US$m 2022 US$m Publicly traded securities – FVTOCI20 Level 1 30 381 Venture fund assets – FVTPL Level 3 94 – Contingent consideration assets (earn-out receivable) Level 3 25 – Contingent consideration liabilities from business combinations Level 3 (242) (269) Note 12: Equity and Reserves (a) Contributed Equity 2023 US$m 2022 US$m Ordinary shares issued and fully paid 5,022 4,988 Share buy-back reserve (4,505) (4,505) Total contributed equity 517 483 Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Where the Group reacquires its own shares, those shares are cancelled. No gain or loss is recognised in the statement of comprehensive income and the consideration paid to acquire the shares, including transaction costs net of income taxes is recognised directly as a reduction in equity. Ordinary shares receive dividends as declared and, in the event of winding up the company, participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or proxy, at a meeting of the company. Share buy-backs were undertaken at higher prices than the original subscription prices which reduced the historical balance for ordinary share contributed equity to nil. The share buy-back reserve was created to reflect the excess value of shares bought over the original amount of subscribed capital. Information relating to changes in contributed equity is set out in Note 10. CSL Limited Annual Report 2022/23 145
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