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Note 5: Fair Value Measurements

The following tables provide an analysis of assets and liabilities that are measured at fair value. The different levels of the fair value hierarchy are defined below.

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.

Note 5A: Fair value measurements

Recurring fair value measurements at the end of the reporting period by hierarchy for assets and liabilities in 2014
    Fair value measurements at the end of the reporting period using
Fair value
$’000
Level 1
inputs
$’000
Level 2
inputs
$’000
Level 3
inputs
$’000
 
Non-financial assets:        
    Office Equipment 928  –  928
     Motor Vehicles 33 33
    Furniture 655 655
    Personal Computers 77 77
    Other IT Equipment 7,053 7,053
    Land and buildings 5,721 5,721
    Artworks and Heritage 104 104
    Library 1,871 1,871
Total non-financial assets 16,442 137 16,305
Total fair value measurements of assets
in the statement of financial position
       
16,442
 

 
137
 
16,305
 

Fair value measurements – highest and best use of all non-financial assets are the same as their current use.


Note 5B: Level 1 and Level 2 transfers for recurring fair value measurements

No assets were transferred between Level 1 and Level 2.

Note 5C: Valuation technique and inputs for Level 2 and Level 3 fair value measurements

Category
(Level 2 or
Level 3)
Fair value $’000 Valuation
technique(s)1
Inputs used Range (weighted
average)2
Non-financial assets          
    Motor Vehicles Level 2 33 Cost Approach Sales of similar vehicles. N/A
    Artworks and Heritage Level 2 104 Cost Approach Sales of similar art work. N/A
    Office Equipment Level 3 928 Cost Approach Estimated replacement cost of similar assets adjusted for remaining useful life. $0 – $196,589 ($3,296)
    Furniture Level 3 655 Cost Approach Estimated replacement cost of similar assets $0 – $232,144
        adjusted for remaining useful life. ($11,549)
    Personal Computers Level 3 77 Cost Approach Estimated replacement cost of similar assets adjusted for remaining useful life. $0 – $2,595 ($149)
    Other IT Equipment Level 3 7,053 Cost Approach Estimated replacement cost of similar assets $0 – $3,056,442
        adjusted for remaining useful life. ($12,085)
    Land and buildings Level 3 5,721 Cost Approach Estimated replacement cost of similar assets $93 – $610,795
        adjusted for remaining useful life. ($66,901)
    Library Level 3 1,871 Cost Approach Estimated replacement cost of similar assets $1,871,241
        adjusted for remaining useful life. ($1,872,241)

1. No change in valuation technique occurred during the period.

2. Significant unobservable inputs only. Not applicable for assets or liabilities in the Level 2 category.

Recurring Level 3 fair value measurement – valuation processes

The Treasury procured valuation services from Preston Rowe Patterson Valuers (PRP). PRP provided a written assurance that the valuation model is in compliance with AASB 13. PRP valuations are based on the most recent comprehensive valuation of the Treasury’s fixed assets. PRP has used the cost approach which reflects the amount that would be required currently to replace the service capacity of the Treasury’s fixed assets. PRP has updated the depreciated replacement cost analysis relative to current replacement cost for each asset and the expended useful life to establish an appropriate estimate of fair value as at 30 June 2014.

Recurring Level 3 fair value measurement – sensitivity of inputs

The fair value estimates provided at a reporting date based on level 3 inputs are sensitive to movements in replacement cost as at the reporting date, either up or down. Adopted useful life, expended useful and remaining useful life are considered to be generally stable inputs and would not be subject to sensitivity unless the Treasury revised its policy with respect to the useful life of a particular asset class.

Note 5D: Reconciliation for recurring Level 3 fair value measurements Recurring Level 3 fair value measurements – reconciliation for assets

  Non-financial assets  
  Office
Equipment
2014
$’000
Furniture
2014
$’000
Land and
Buildings
2014
$’000
Library
2014
$’000
Personal
Computers
2014
$’000
Other IT
Equipment
2014
$’000
Total
2014
$’000
Opening balance 998 1,146 504 7,237 6,815 1,871 18,571
   Total gains/(losses) recognised in net cost of services’ (316) (420) (432) (1,679) (4,288) (7,135)
   Purchases 263 148 326 1,489 2,975 5,201
   Settlements (17) (219) (321) 6 219 (332)
Closing balance 928 655 77 7,053 5,721 1,871 16,305
Changes in unrealised gains/(losses) recognised in net cost of services

1. These gains/(losses) are presented in the Statement of Comprehensive Income under depreciation and amortisation