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  "documentTitle": "Olam International Ltd. (SGX:O32)",
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  "authorName": "Carson Block",
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  "presentationDate": "2012-11-27 00:00:00",
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  "notes": "Discusses accounting standards (IFRS/GAAP fair value hierarchy) and specifically flags Level 3 derivatives as susceptible to management manipulation.",
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      "text": "As such, the fair value determination of the Level 3 derivatives allows for significant management discretion in its valuation and makes this category of derivative extremely susceptible to manipulation.",
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      "text": "Level 1 - Valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities.\nLevel 2 - Valuations based on quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.\nLevel 3 - Valuations based on inputs that are unobservable and deemed significant to the overall fair value measurement. This includes situations where there is little, if any, market activity for the asset or liability.",
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      "text": "From FY2006 to FY2010, Olam's derivative financial liabilities outweighed its derivative financial assets. In 2011, there was a reversal with a derivative net asset balance of S$22.8 million of in the year and in 2012 the net derivative assets stood at S$186.5 million, as per the table below:",
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      "text": "Investors should be wary of companies with significant Level 3 balances as these denote that the company is carrying an asset/liability whose value is not fully quantifiable or necessarily understood. Listed companies that really value transparency should prefer to have their derivatives in Level 1 and Level 2; however, this is not always possible.",
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      "text": "In order to allow more comparability between companies, the accounting standards require companies to classify their derivatives based on the fair value hierarchy as set out below:",
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      "text": "Per the three levels of the fair value hierarchy, Level 3 derivatives have some unobservable inputs and these inputs are deemed significant to the overall fair value measure. As such, the fair value determination of the Level 3 derivatives allows for significant management discretion in its valuation and makes this category of derivative extremely susceptible to manipulation.",
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      "text": "(Note that all figures in this section exclude convertible bonds from calculations.)",
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      "text": "Level 3 Derivatives – Who Decides How Much These are Worth?",
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      "text": "Level 3 Derivatives and the Balance Sheet",
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