Note 5: Fair Value Measurements

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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 assetsHeritage and cultural
2014
$'000		Total land & buildings
2014
$'000		Total
2014
$'000
Opening balance60 1,580 1,640
Purchases- 449 449
Depreciation- (507) (507)
Closing balance60 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.

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