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TORRES STRAIT REGIONAL AUTHORITY
Notes to and forming part of the financial statements for the period ended 30 June 2014
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
| 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 | ||||
| Land | 9,360 | - | 9,360 | - |
| Buildings on freehold land | 22,715 | - | 22,715 | - |
| Leasehold improvements | 161 | - | 161 | - |
| Heritage and cultural | 60 | - | - | 60 |
| Other property, plant and equipment | 1,522 | - | - | 1,522 |
| Total non-financial assets | 33,818 | - | 32,236 | 1,582 |
| Total fair value measurements of assets in the statement of financial position | ||||
| 33,818 | - | 32,236 | 1,582 | |
Fair value measurements - highest and best use differs from current use for non-financial assets (NFAs)
The highest and best use of all non-financial assets are the same as their current use.
TORRES STRAIT REGIONAL AUTHORITY
Notes to and forming part of the financial statements for the period ended 30 June 2014
Note 5B: Valuation Technique and Inputs for Level 2 and Level 3 Fair Value Measurements
| Level 2 and 3 fair value measurements - valuation technique and the inputs used for assets and liabilities in 2014 | |||||
| Category (Level 2 or Level 3) | Fair Value $'000 |
Valuation technique(s)1 | Inputs used | Range (weighted average)2 | |
| Non-financial | |||||
| assets | |||||
| Land | Level 2 | 9,360 | Market valuation | Sales prices of comparable land adjusted for property size, location, topography, and other inherent attributes | N/A |
| Buildings on freehold land | Level 2 | 22,715 | Depreciated Current Replacement Cost | Construction costs of comparable buildings adjusted for size and type of structure, location and condition rating. | N/A |
| Leasehold improvements | Level 2 | 161 | Depreciated Current Replacement Cost | Construction costs of comparable leasehold improvements adjusted for size and type of structure and location. | N/A |
| Heritage and cultural | Level 3 | 60 | Depreciated Current | Sales prices of similar artwork adjusted for the Condition Rating and cost of achieving a sale. | Condition Rating 2 (2) |
| Other property, plant and equipment | Level 3 | 1,522 | Depreciated Current Replacement Cost | Sales prices of similar equipment adjusted for the Condition Rating and cost of achieving a sale. | Condition Rating 1-3 (1.9) |
1. No change in valuation technique occurred during the period.
2. Significant unobservable inputs for Level 3 assets or liabilities only. Not applicable for assets or liabilities in the Level 2 category.
Recurring and non-recurring Level 3 fair value measurements - valuation processes
The TSRA procured valuation services from Neil Teves - AAPI Registered Valuer No. 382, and relied on valuation models provided by Mr Teves. The entity tests the procedures of the valuation model every 12 months. Mr Teves provided written assurance to the entity that the model developed is in compliance with AASB 13.
Recurring Level 3 fair value measurements - sensitivity of inputs
The significant unobservable input used in the fair value measurement of the entity's heritage and cultural assets and other property, plant and equpiment is the condition rating of the item. The condition rating has a possible range of 1 to 5. Significant increases (decreases) in this input in isolation would result in a significantly lower (higher) fair value measurement.
Note 5C: Reconciliation for Recurring Level 3 Fair Value Measurements
The reconciliation for recurring level 3 fair value measurements is as follows:
| Non-Financial Assets | |||
| Recurring Level 3 fair value measurements - reconciliation for assets | Heritage and cultural 2014 $'000 | Total land & buildings 2014 $'000 | Total 2014 $'000 |
| Opening balance | 60 | 1,580 | 1,640 |
| Purchases | - | 449 | 449 |
| Depreciation | - | (507) | (507) |
| Closing balance | 60 | 1,522 | 1,582 |
The entity's policy for determining when transfers between levels are deemed to have occurred can be found in Note 1.