FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
Cash resources, securities, and derivative financial instruments are reported on the consolidated balance sheets at fair value.
We categorize our fair value measurements of financial instruments according to a three-level hierarchy. Level 1 fair value measurements reflect unadjusted quoted prices in active markets for identical assets and liabilities that we can access at the measurement date. Level 2 fair value measurements are estimated using observable inputs, including quoted market prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, and model inputs that are either observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 fair value measurements are determined using one or more inputs that are unobservable and significant to the fair value of the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available at the measurement date. The following table summarizes the significant financial assets and liabilities recorded on the consolidated balance sheets at fair value. Notes 2, 3, 4, 5, 6, 10, 12, 14, 22 and 24 of the audited consolidated financial statements for the year ended October 31, 2022 provide additional information regarding these financial instruments.
Table 30 - Valuation of Financial Instruments ($ thousands)
Valuation Technique
As at October 31, 2022
Fair Value
Level 1
Level 2
Level 3
Financial Assets
Cash resources
$
115,979 $
115,979 $
- $
- -
Securities
4,518,795
1,003,840
3,514,955
Loans
35,478,626
- -
-
35,478,626
Derivatives
110,521
110,521
-
Total Financial Assets
$
40,223,921 $ 1,119,819 $
3,625,476 $ 35,478,626
Financial Liabilities Deposits
$
32,414,786 $
- $
32,414,786 $
- - - -
Securities sold under repurchase agreements
247,354
- - -
247,354
Debt
3,417,350
3,417,350
Derivatives
156,081
156,081
Total Financial Liabilities
$
36,235,571 $
- $
36,235,571 $
-
Valuation Technique
As at October 31, 2021
Fair Value
Level 1
Level 2
Level 3
Financial Assets
Cash resources
$
128,459 $
128,459 $
- $
- - -
Securities
3,573,878
207,209
3,366,669
Securities purchased under resale agreements
30,048
- - -
30,048
Loans
33,138,017
-
33,138,017
Derivatives
52,862
52,862
-
Total Financial Assets
$
36,923,264 $
335,668 $
3,449,579 $ 33,138,017
Financial Liabilities Deposits
$
30,118,635 $
- $
30,118,635 $
- - - -
Debt
3,058,090
- -
3,058,090
Derivatives
36,068
36,068
Total Financial Liabilities
$
33,212,793 $
- $
33,212,793 $
CHANGES IN ACCOUNTING POLICIES AND FINANCIAL STATEMENT PRESENTATION INTEREST RATE BENCHMARK REFORM
Various interest rates and other indices that are deemed to be benchmarks, including the London Interbank Offered Rate (LIBOR), have been the subject of international regulatory guidance and proposals for reform. Regulators in various jurisdictions have advocated for the transition from Interbank Offered Rates (IBORs) to alternative benchmark rates, based upon risk-free rates informed by actual market transactions. In March 2021, the Financial Conduct Authority confirmed that most USD LIBOR tenors will cease to be provided beginning June 30, 2023. In December 2021, the Canadian Alternative Reference Rate working group (CARR) recommended to CDOR’s administrator that the C anadian Dollar Offered Rate (CDOR) should also cease calculation and publication. On May 16, 2022, the CDOR administrator, Refinitiv Benchmark Services (UK) Limited (Refinitiv), announced the cessation of CDOR by June 28, 2024, consistent with CARR’s recommendations. CARR has proposed a two -stage plan for the adoption of Canadian Overnight Repo Rate Average (CORRA) as the replacement benchmark rate and has announced it will develop a one- and three-month Term CORRA benchmark which is expected to be published late in the third calendar quarter of 2023. OSFI also announced that it expects all new derivative contracts and securities to transition to alternative rates by June 30, 2023, with no new CDOR exposure being booked after that date, with limited permitted exceptions. OSFI also expects loans referencing CDOR to transition by June 28, 2024, and financial institutions to prioritize system and model updates to accommodate the use of CORRA prior to June 28, 2024. In response to interest rate benchmark reform, the IASB issued two phases of amendments to accounting standards. We adopted Phase 1 amendments to hedge accounting requirements in IFRS 9 Financial Instruments (IFRS 9), IAS 39 Financial Instruments: Recognition and Measurement (IAS 39), IFRS 7 Financial Instruments: Disclosures (IFRS 7) and IFRS 16 Leases (IFRS 16) on November 1, 2020. These amendments apply until IBOR-based cash flows transition to new risk-free rates or when the applicable hedging relationships are discontinued.
42 | CWB Financial Group 2022 Annual Report
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