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Notes to the financial statements

22. Financial assets

The carrying amounts and fair values of financial assets are as follows:

  2009   2008
US$ million Estimated
fair value
Carrying value   Estimated fair value Carrying value
At fair value through profit and loss          
Trade and other receivables(1) 838 838   192 192
Other financial assets (derivatives)(2) 603 603   376 376
Loans and receivables          
Cash and cash equivalents 3,269 3,269   2,771 2,771
Trade and other receivables(1) 2,509 2,509   2,605 2,605
Financial asset investments 1,569 1,598   906 935
Available for sale investments          
Financial asset investments 1,131 1,131   2,353 2,353
Total financial assets 9,919 9,948   9,203 9,232
(1)
Trade and other receivables exclude prepayments.
(2)
Derivative instruments are analysed between those which are 'Held for trading' and those designated into hedge relationships in note 24.

The fair values of financial assets represent the market value of quoted investments and other traded instruments. For non-listed investments and other non-traded financial assets fair value is calculated using discounted cash flows with market assumptions, unless carrying value is considered to approximate fair value.

An analysis of financial assets carried at fair value is set out below:

  2009
US$ million Level 1(1) Level 2(2) Level 3(3) Total
At fair value through profit and loss        
Trade and other receivables - 838 - 838
Other financial assets (derivatives) 3 569 31 603
Available for sale investments        
Financial asset investments 1,072 19 40 1,131
  1,075 1,426 71 2,572
(1)
Valued using unadjusted quoted prices in active markets for identical financial instruments. This category includes listed equity shares, and certain exchange-traded derivatives.
(2)
Valued using techniques based significantly on observable market data. Instruments in this category are valued using valuation techniques where all of the inputs that have a significant effect on the valuation are directly or indirectly based on observable market data.
(3)
Instruments in this category have been valued using a valuation technique where at least one input (which could have a significant effect on the instrument's valuation) is not based on observable market data. Where inputs can be observed from market data without undue cost and effort, the observed input is used. Otherwise, management determines a reasonable estimate for the input. Financial assets included within level 3 primarily consist of embedded derivatives and financial asset investments where valuation depends upon unobservable inputs.

The movements in the fair value of the level 3 financial assets are shown in the following table:

US$ million 2009
At 1 January 137
Net loss recorded in financing remeasurements (111)
Net gain recorded in statement of comprehensive income 1
Reclassification to Other financial liabilities (derivatives) 35
Currency movements 9
At 31 December 71

For the level 3 financial assets, changing certain inputs to reasonably possible alternative assumptions may change the fair value significantly. Where significant, the effect of a change in these assumptions to a reasonably possible alternative assumption is outlined in the table below. These sensitivities have been calculated by amending the fair value of the level 3 financial assets as at 31 December 2009 for a change in each individual assumption, as outlined below, whilst keeping all other assumptions consistent with those used to calculate the fair value recognised in the financial statements.

  2009
US$ million Change in assumption Increase/(decrease) in fair value of assets
Financial asset investments Decrease of 10% in liquidity discount percentage 11
  Increase of 10% in liquidity discount percentage (11)

Financial asset risk exposures are set out in note 24.

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Annual Report 2009