01 02 03 Financial Statements 04 40. Fair value measurements continued Fair value hierarchy continued Total Carrying Unrecognised fair value value gain (loss) 31 December 31 December 31 December Level 1 Level 2 Level 3 2017 2017 2017 Assets measured at fair value Property and equipment – – 441,528 441,528 441,528 – Other assets: call option – – 10,106 10,106 10,106 – Other assets: derivative financial asset – 130 – 130 130 – Liabilities measured at fair value Payables for share acquisitions: put option – – 61,512 61,512 61,512 – Payables for share acquisitions: holdback for business acquisitions – – 36,746 36,746 36,746 – Assets for which fair values are disclosed Cash and cash equivalents – 48,840 – 48,840 48,840 – Amounts due from credit institutions – – 14,768 14,768 14,768 – Receivables from healthcare services – – 100,944 100,944 100,944 – Insurance premiums receivable – – 20,233 20,233 20,233 – Receivables from sales of pharmaceuticals – – 19,798 19,798 19,798 – Other assets: loans issued and lease deposit – – 3,199 3,199 3,199 – Other assets: non-medical receivables – – 1,626 1,626 1,626 – Liabilities for which fair values are disclosed Borrowings – – 256,167 256,167 267,010 10,843 Debt securities issued – – 95,234 95,234 93,493 (1,741) Finance lease liabilities – – 8,933 8,933 8,834 (99) Other liabilities: derivative financial liabilities – 1,091 – 1,091 1,091 – The Group cares land and office buildings and hospitas and clinics at fair value (Leve3). Reconciliation between opengand closing balances is presented in Note 11. The following is a description of the determination of fair value for financial instruments and property that are recorded at fair value using valuation techniques. These incorporate the Group’s estimate of assumptions that a market participant would make when valuing the instruments. Property and equipment Property carried at fair value consists of land and buildings and hospitals and clinics, for which fair value is derived by certain inputs that are not based on observable market data. The value of these assets is measured using the market and depreciated replacement cost (“DRC”) approaches. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable land and buildings, respectively, while DRC approach uses construction costs for similar properties. Derivative financial instruments Derivative financial instruments valued using a valuation technique with market observable inputs comprise forward foreign exchange contracts. The applied valuation technique employs a discounted forward pricing model. The model incorporates various inputs including the foreign exchange spot and forward rates. Call option represents option on acquisition of remaining 33% equity interest in JSC GEPHA from non-controlling interests in 2022 based on pre-determined EBITDA multiple (6.0 times EBITDA) of JSC GEPHA. The Group has applied binomial model for option valuation. Major unobservable input for call option valuation represents volatility of price of the underlying 33% minority share of equity, which was estimated based on actual volatility of Parent Company’s market capitalisation from 1 January 2013 till 31 December 2017 period, which equalled 34.7%. If the volatility was 10% higher, fair value of call option would increase by GEL 2,533 (2017: GEL 1,989) if volatility was 10% lower call option value would decrease by GEL 2,770 (2017: GEL 1,940). The Group recognised GEL 6,863 (2017: GEL 10,106) unrealised gains on the call option during the year ended 31 December 2018. Put option represents option owned by non-controlling shareholders on sale of remaining 33% equity interest in JSC GEPHA to the Group in 2022 based on pre-determined EBITDA multiple (4.5 times EBITDA) of JSC GEPHA. The Group has estimated put option value based on number of unobservable inputs. Major unobservable input for put option valuation represents estimated EBITDA of JSC GEPHA as well as discount rate used to value the option. The Group has applied 11% discount rate to value the option. If the discount rate was 1% higher, fair value of put option redemption liability would decrease by GEL 2,528 (2017: GEL 2,674) if discount rate was 1% lower put option redemption liability value would increase by GEL 2,644 (2017: GEL 2,821). 173