Page 327 - TSMC 2020 Annual Report
P. 327

Reconciliation of Level 3 fair value measurements of financial assets
The financial assets measured at Level 3 fair value were equity investments classified as financial assets at FVTOCI. Reconciliations for the years ended December 31, 2020 and 2019 were as follows:
Years Ended December 31
Balance, beginning of year $ 877,110 Recognized in other comprehensive income (41,995) Disposals and proceeds from return of capital of investments (285)
Balance, end of year $ 834,830
Valuation techniques and assumptions used in Level 2 fair value measurement
The fair values of financial assets and financial liabilities are determined as follows:
$ $
963,610 (85,393) (1,107)
       Forward exchange contracts are measured using forward exchange rates and discount rates derived from quoted market prices.
 The fair value of accounts receivable classified as at FVTOCI is determined by the present value of future cash flows based on the discount rate that reflects the credit risk of counterparties.
Valuation techniques and assumptions used in Level 3 fair value measurement
The fair values of non-publicly traded equity investments are mainly determined by using the asset approach and market approach.
The asset approach takes into account the net asset value measured at the fair value by independent parties.
The market approach is used to arrive at their fair values, for which the recent financing activities of investees, the market transaction prices of the similar companies and market conditions are considered.
3) Fair value of financial instruments that are not measured at fair value
Except as detailed in the following table, the Company considers that the carrying amounts of financial instruments in the parent company only financial statements that are not measured at fair value approximate their fair values.
Fair value hierarchy
The table below sets out the fair value hierarchy for the Company’s financial assets and liabilities which are not required to measure at fair value:
  Financial liabilities
Financial liabilities at amortized costs Bonds payable
$ 173,972,033
December 31, 2020
Carrying Amount
$ 173,050,745
Level 2 Fair Value
     - 168 -
- 56 -

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