Annual Report 2015
91
2 SIGNIFICANT ACCOUNTING POLICIES
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2.6 Summary of significant accounting policies
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q) Fair Value
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Level 1
Included in the Level 1 category are financial assets and liabilities that are measured in whole or in part by reference to
published quotes in an active market. A financial instrument is regarded as quoted in an active market if quoted prices are
readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and
those prices represent actual and regularly occurring market transactions on an arm’s length basis.
Level 2
Included in the Level 2 category are financial assets and liabilities that are measured using a valuation technique based on
assumptions that are supported by prices from observable current market transactions and for which pricing is obtained
via pricing services, but where prices have not been determined in an active market. This includes financial assets with fair
values based on broker quotes, investments in private equity funds with fair values obtained via fund managers and assets
that are valued using the Group’s own models whereby the majority of assumptions are market observable.
Level 3
Included in the Level 3 category are financial assets and liabilities that are not quoted as there are no active markets to
determine a price. These financial instruments are held at cost, being the fair value of the consideration paid for the
acquisition of the investment, and are regularly assessed for impairment.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that
is significant to the fair value measurement as a whole) at the end of each reporting period.
Where the Group’s available-for-sale investments are not actively traded in organised financial markets, the fair value is
determined using discounted cash flow analysis, which requires considerable judgement in interpreting market data and
developing estimates. Accordingly, estimates contained herein are not necessarily indicative of the amounts that the Group
could realise in a current market exchange. The use of different assumptions and/or estimation methodologies may have
a material effect on the estimated fair values. The fair value information for available-for-sale investments is based on
information available to management as at the dates presented. Management is not aware of any factors that would
significantly affect the estimated fair value amounts.
Investments classified as ‘at fair value through profit or loss’ are actively traded in organised markets and fair value is
determined by reference to the market price at year end or on the last trade date prior to year end.
Financial instruments where carrying value is equal to fair value:- Due to their short-term maturity, the carrying value
of certain financial instruments is assumed to approximate their fair values. These include cash and cash equivalents,
investment interest receivable, customers’ deposit accounts, other fund raising instruments, other assets and other liabilities.
Advances are net of specific and other provisions for impairment. The fair values of advances is based on a current yield
curve appropriate for the remaining term to maturity.
