Anglo American Annual Report 2012

24. FINANCIAL LIABILITIES continuedFor financial liabilities which are traded on an active market, such as listed debt instruments, fair value is determined by reference to market value. Fornon-traded financial liabilities, fair value is calculated using discounted cash flows, considered to be reasonable and consistent with those that would be usedby a market participant, unless carrying value is considered to approximate fair value.Fair value hierarchyAn analysis of financial liabilities carried at fair value is set out below:2012 2011US$ million Level 1 (1) Level 2 (2) Level 3 (3) Total Level 1 (1) Level 2 (2) Level 3 (3) TotalAt fair value through profit and lossTrade and other payables – 296 – 296 – 262 – 262Derivative financial liabilities – 865 216 1,081 – 924 188 1,112– 1,161 216 1,377 – 1,186 188 1,374(1)Valued using unadjusted quoted prices in active markets for identical financial instruments.(2)Valued using techniques based significantly on observable market data. Instruments in this category are valued using valuation techniques where all of the inputs that have a significant effecton the valuation are directly or indirectly based on observable market data.(3)Instruments in this category have been valued using a valuation technique where at least one input (which could have a significant effect on the instrument’s valuation) is not based onobservable market data. Where inputs can be observed from market data without undue cost and effort, the observed input is used. Otherwise, management determines a reasonable estimatefor the input. Financial instruments included within level 3 primarily consist of embedded derivatives and certain cross currency swaps of Brazilian real denominated borrowings, whosevaluation depends upon unobservable inputs and commodity sales contracts which do not meet the conditions for the ‘own use’ exemption under IAS 39.The movements in the fair value of the level 3 financial liabilities are shown in the following table:US$ million 2012 2011At 1 January 188 60Net gain/(loss) recorded in remeasurements 14 (5)Cash flow – 15Reclassification to/from level 3 financial assets 14 123Currency movements – (5)At 31 December 216 188For the level 3 financial liabilities, changing certain inputs to reasonably possible alternative assumptions may change the fair value significantly. Wheresignificant, the effect of a change in these assumptions to a reasonably possible alternative assumption is outlined in the table below. These sensitivities havebeen calculated by amending the fair value of the level 3 financial liabilities at 31 December for a change in each individual assumption, as outlined below, whilekeeping all other assumptions consistent with those used to calculate the fair value recognised in the financial statements.2012 2011US$ millionChange in assumptionIncrease in fairvalue of liabilitiesIncrease in fairvalue of liabilitiesDerivative financial liabilities Shift of TJLP curve (1) 17 21(1)TJLP is a Brazilian domestic interest rate. The sensitivities are provided on the net liability position of such level 3 financial instruments.Financial statementsFinancial liability risk exposures are set out in note 25.Analysis of borrowingsAn analysis of borrowings, as presented on the Consolidated balance sheet, is set out below:Due withinone yearDue afterone year2012 2011Due withinone yearDue afterone yearUS$ millionTotalTotalSecuredBank loans and overdrafts (1) 5 21 26 55 276 331Obligations under finance leases (2) 3 19 22 4 17 218 40 48 59 293 352UnsecuredBank loans and overdrafts 251 2,871 3,122 673 1,722 2,395Bonds issued under EMTN programme 994 6,382 7,376 163 4,167 4,330US bonds 767 4,628 5,395 – 3,408 3,408Convertible bond (3) – – – – 1,504 1,504Other loans 584 1,229 1,813 123 761 8842,596 15,110 17,706 959 11,562 12,521Total 2,604 15,150 17,754 1,018 11,855 12,873(1)Assets with a book value of $49 million (2011: $408 million) have been pledged as security, of which $35 million (2011: $170 million) are property, plant and equipment, $10 million(2011: $113 million) are financial assets and $4 million (2011: $125 million) are inventories. Related to these assets are borrowings of $26 million (2011: $331 million).(2)Details of assets held under finance leases are provided in note 15. The minimum lease payments under finance leases fall due as follows:US$ million 2012 2011Within one year 5 4Greater than one year, less than five years 14 12Greater than five years 12 1331 29Future finance charges on finance leases (9) (8)Present value of finance lease liabilities 22 21(3)All outstanding convertible bonds were converted or redeemed during the year, see below.Anglo American plc Annual Report 2012 167