Fair value measurements

3 Months Ended

Mar. 31, 2017

(a) Financial instruments recorded at fair value

The following tables summarize the valuation of Belmond’s financial instruments recorded at fair value by the fair value hierarchy at March 31, 2017 and December 31, 2016:



	Level 1	Level 2		Level 3	Total
March 31, 2017	$’000	$’000		$’000	$’000

Assets at fair value:
Derivative financial instruments	—	—		—	—

Total assets	—	—		—	—

Liabilities at fair value:
Derivative financial instruments	—	(2,513	)	—	(2,513	)

Total net liabilities	—	(2,513	)	—	(2,513	)



	Level 1	Level 2		Level 3	Total
December 31, 2016	$’000	$’000		$’000	$’000

Assets at fair value:
Derivative financial instruments	—	—		—	—

Total assets	—	—		—	—

Liabilities at fair value:
Derivative financial instruments	—	(3,364	)	—	(3,364	)

Total net liabilities	—	(3,364	)	—	(3,364	)

During the three months ended March 31, 2017, there were no transfers between levels of the fair value hierarchy.

(b) Other financial instruments

Certain methods and assumptions are used to estimate the fair value of each class of financial instruments. The carrying amount of current assets and current liabilities as disclosed on the condensed consolidated balance sheets approximate their fair value due to the short-term nature of those instruments.

The fair value of Belmond's long-term debt, excluding interest rate swaps and caps, is determined using the contractual cash flows and credit-adjusted discount curves. The fair value of the debt is the present value of those contractual cash flows which are discounted at the current market cost of debt and adjusted for the credit spreads. Credit spreads take into consideration general market conditions, maturity and collateral.

The estimated carrying values, fair values, and levels of the fair value hierarchy of Belmond's long-term debt as of March 31, 2017 and December 31, 2016 were as follows:

March 31, 2017

December 31, 2016

Carrying
amounts
$’000

Fair value
$’000

Carrying
amounts
$’000

Fair value
$’000

Total long-term debt, before deduction of discount on secured term loan and debt issuance costs, excluding obligations under capital leases

Level 2

602,777

626,222

602,083

626,613

There were no non-financial assets measured at fair value on a non-recurring basis for the three months ended March 31, 2017 and 2016.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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