Megachem Limited Annual Report 2015 112 Notes to the Financial Statements 31 December 2015 24. Financial liabilities at fair value through profit or loss Forward foreign exchange contracts Forward foreign exchange contracts are entered into to manage exposure to fluctuations in foreign currency exchange rates on expected sales and purchases denominated in United States Dollar (“USD”), Euro Dollar (“Euro”), or Japanese Yen (“Yen”). The table below sets out the notional principal amounts of the outstanding forward foreign exchange contracts of the Group and the Company, and their corresponding favourable and unfavourable fair values (level 2) at the reporting date. The amount of notional amount outstanding is not necessarily a measure or indication of market risk. Notional principal Favourable fair value Unfavourable fair value 2015 2014 2015 2014 2015 2014 $ $ $ $ $ $ Group Sell Euro 3,705,000 1,095,646 – 24,720 14,179 – Sell USD 1,919,204 1,719,965 – – 33,869 45,301 Purchase Euro 231,552 302,082 4,016 – 642 3,639 Purchase USD 2,105,802 1,984,574 28,160 22,320 1,905 2,145 7,961,558 5,102,267 32,176 47,040 50,595 51,085 Notional principal Favourable fair value Unfavourable fair value 2015 2014 2015 2014 2015 2014 $ $ $ $ $ $ Company Purchase USD 1,078,252 – 11,158 – 481 – 1,078,252 – 11,158 – 481 – The fair value (Level 2) of forward foreign exchange contracts is based on the current value of the difference between the contractual exchange rate and the market rate at the end of the reporting year. The valuation technique uses market observable inputs. At 31 December 2015, the settlement date on forward foreign exchange contracts ranges from 1 to 10 months (2014: 1 to 7 months).
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