OJSC Oil Company Rosneft Consolidated Financial Statements

OJSC Oil Company Rosneft
Notes to Consolidated Financial Statements (continued)
26. Fair Value of Financial Instruments and Risk Management
Effective January 1, 2008, the Company adopted SFAS 157, Fair Value Measurements ("SFAS 157").
SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to
transfer a liability in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. SFAS 157 also establishes a fair
value hierarchy which requires an entity to maximize the use of observable inputs when measuring fair
value.
SFAS 157 defines three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities that the reporting
entity has the ability to assess at the measurement date. An active market for the asset
or liability is a market in which transactions for the asset or liability occur with
sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets
and liabilities; quoted prices in markets that are not active; or model-derived
valuations or other inputs that are observable or can be corroborated by observable
market data.
Level 3 – Unobservable inputs for the asset or liability. These inputs reflect the Company’s own
assumptions about the assumptions a market participant would use in pricing the asset
or liability.
Assets and liabilities of the Company that are measured at fair value on a recurring basis are presented
in the table below in accordance with the fair value hierarchy.
Fair value measurement
as of December 31, 2008
Level 1 Level 2 Level 3 Total
Assets:
Current assets
Trading securities 46 34 − 80
Available-for-sale securities − 22 − 22
Non-current assets
Available-for-sale securities 7 4 − 11
Total assets measured at fair value 53 60 − 113
Liabilities:
Derivative financial instruments − (190) − (190)
Total liabilities measured at fair value − (190) − (190)
The market for a number of financial assets is not active. In accordance with requirements of
FSP FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is
Not Active, observable inputs of Level 2 were used to disclose fair value of such financial assets.
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