Fair Value Measurements

9 Months Ended

Sep. 30, 2019

Note 23. Fair Value Measurements

The following table presents information about our financial instruments measured at fair value on a recurring basis, grouped into level 1 to 3 based on the degree to which the fair value is observable:


	September 30, 2019
	Level I	Level II	Level III	Total
Contingent Consideration Liability1	—	—	2,327,919	2,327,919

Note

1 This represents the liability incurred in connection with the acquisition of DBOT shares during Q3 2019 as disclosed in Note 5(f).

The fair value of the contingent consideration liability at September 30, 2019 was valued using the Black-Scholes Merton method. The following table presents the significant inputs and assumptions used in the model:


	September 30, 2019
Risk-free interest rate	1.8	%
Expected volatility	30	%
Expected term	0.5 year
Expected dividend yield	0	%

The significant unobservable inputs used in the fair value measurement of the Company’s contingent consideration liability includes the risk-free interest rate, expected volatility, expected term and expected dividend yield. Significant increases or decreases in any of those inputs in isolation would result in a significantly different fair value measurement.

Reconciliation of level 3 fair value measurements:


	Contingent
	Consideration
	Liability
January 1, 2019	$	—
Addition		(2,217,034)
Remeasurement (loss)/gain recognized in the income statement		(110,885)
September 30, 2019	$	(2,327,919)

- 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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