Question

A company has an interest rate swap that allows the company to receive a fixed rate and pay a variable rate based on LIBOR. The company is evaluating how to classify this instrument within its fair value hierarchy disclosures. What level in the fair value hierarchy is the LIBOR swap rate input to this measurement?

Answer 1

IFRS 13 divides the fair value hierarchy at 3 levels - Level 1, Level 2 and Level 3.

As per the definitions given under various levels of the types of assets and liabilities covered under them.

Based on the definitions, we can say that LIBOR swap rate input shall be covered under Level 2.

Explained:

Level 2 inputs include "inputs other than quoted prices that are observable for the asset or liability" which clearly covers LIBOR swap rates if that rate is observable for the liability at commonly quoted intervals.