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Ascott Residence Trust
Annual Report 2015
2 Basis of preparation
(continued)
2.4 Use of estimates and judgements
(continued)
Measurement of fair values
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both
financial and non-financial assets and liabilities.
The Group has an established control framework with respect to the measurement of fair values. Significant
fair value measurements, including Level 3 fair values, will be reported directly to the Chief Executive Officer
(“CEO”).
Management regularly reviews significant unobservable inputs and valuation adjustments. If third party
information, such as valuation of investment property by external valuers, is used to measure fair values, then
management assesses and documents the evidence obtained from the third parties to support the conclusion
that such valuations meet the requirements of FRS, including the level in the fair value hierarchy in which such
valuations should be classified.
The valuation of significant assets and their financial impact are discussed by the Audit Committee and Board
of Directors.
When measuring the fair value of an asset or a liability, the Group uses observable market data as far as
possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in
the valuation techniques as follows:
•
Level 1:
quoted prices (unadjusted) in active markets for identical assets or liabilities.
•
Level 2:
inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices).
•
Level 3
: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value
hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value
hierarchy as the lowest level input that is significant to the entire measurement (with Level 3 being the lowest).
The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period
during which the change has occurred.
Further information about the assumptions made in measuring fair values is included in the following note:
• Note 33 – valuation of serviced residence properties, assets held for sale and financial instruments
