/ . 7 3
A N N U A L R E P O R T 2 0 1 5
T H E S T R E N G T H O F O U R B R A N D S
2 .
Summa r y o f S i gn i f i c an t ac coun t i ng Po l i c i e s ( Con t ’ d )
Fair Value measurement
Fair value is taken tobe the price that wouldbe received to sell an asset or paid to transfer a liability in anorderly transaction
between market participants at the measurement date (that is, an exit price). It is a market-based measurement, not an
entity-specific measurement. When measuring fair value, management uses the assumptions that market participants
would use when pricing the asset or liability under current market conditions, including assumptions about risk. The
entity’s intention to hold an asset or to settle or otherwise fulfil a liability is not taken into account as relevant when
measuring fair value. In making the fair value measurement, management determines the following: (a) the particular
asset or liability being measured (these are identified and disclosed in the relevant notes below); (b) for a non-financial
asset, the highest and best use of the asset and whether the asset is used in combination with other assets or on a
stand-alone basis; (c) the market in which an orderly transaction would take place for the asset or liability; and (d) the
appropriate valuation techniques to use when measuring fair value. The valuation techniques used maximise the use
of relevant observable inputs and minimise unobservable inputs. These inputs are consistent with the inputs a market
participant may use when pricing the asset or liability.
The fair value measurements and related disclosures categorise the inputs to valuation techniques used to measure
fair value by using a fair value hierarchy of three levels. These are recurring fair value measurements unless stated
otherwise in the relevant notes to the financial statements
.
Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 inputs are inputs
other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for the asset or liability. The level is measured on the basis of the lowest level
input that is significant to the fair value measurement in its entirety. Transfers between levels of the fair value hierarchy
are deemed to have occurred at the beginning of the reporting year. If a financial instrument measured at fair value
has a bid price and an ask price, the price within the bid-ask spread or mid-market pricing that is most representative
of fair value in the circumstances is used to measure fair value regardless of where the input is categorised within the
fair value hierarchy. If there is no market, or the markets available are not active, the fair value is established by using
an acceptable valuation technique.
The carrying values of current financial instruments approximate their fair values due to the short-term maturity
of these instruments and the disclosures of fair value are not made when the carrying amount of current financial
instruments is a reasonable approximation of the fair value. The fair values of non-current financial instruments may
not be disclosed separately unless there are significant differences at the end of the reporting year and in the event the
fair values are disclosed in the relevant notes to the financial statements.
Provisions
A liability or provision is recognised when there is a present obligation (legal or constructive) as a result of a past event,
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation. A provision is made using best estimates of the
amount required in settlement and where the effect of the time value of money is material, the amount recognised is
the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the obligation. The increase in the
provision due to passage of time is recognised as interest expense. Changes in estimates are reflected in profit or loss
in the reporting year they occur.
