Notes to the financial statements
Year ended 31 March 2016
2 Basis of preparation (continued)
(d)
Use of estimates and judgements (continued)
Measurement of fair values
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both
financial and non-financial assets and liabilities.
The Group has an established control framework with respect to the measurement of fair values. This includes
a valuation team that has overall responsibility for all significant fair value measurements, including Level 3 fair
values, and reports directly to the Chief Financial Officer.
The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party
information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team
assesses and documents the evidence obtained from the third parties to support the conclusion that such
valuations meet the requirements of FRS, including the level in the fair value hierarchy in which such valuations
should be classified.
Significant valuation issues are reported to the Audit and Risk Committee.
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible.
Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation
techniques as follows:
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
•
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices).
•
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value
hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy
as the lowest level input that is significant to the entire measurement (with Level 3 being the lowest).
The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period
during which the change has occurred.
Further information about the assumptions made in measuring fair values is included in the following notes:
•
Note 33
–
Valuation of investment properties
•
Notes 32 and 33 –
Valuation of financial instruments
.153
A-REIT ANNUAL REPORT
2015/2016
