Annual Report 2015–2016

Note 7.4 Fair Value Measurement
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.
Accounting Policy
NHMRC engaged the service of Australian Valuation Solutions (AVS) to conduct desktop revaluation of all non-financial assets at 31 March 2016 and has relied upon those outcomes to
establish carrying amounts. An annual assessment is undertaken to determine whether the carrying amount of the assets is materially different from the fair value. Comprehensive valuations
carried out at least once every three years. AVS has provided written assurance to NHMRC that the models developed are in compliance with AASB 13.
The methods utilised to determine and substantiate the unobservable inputs are derived and evaluated as follows:
PART 5 financial report
Physical depreciation and obsolescence - assets that do not transact with enough frequency or transparency to develop objective opinions of value from observable market evidence have been
measured utilising the depreciated replacement cost approach. Under the depreciated replacement cost approach the estimated cost to replace the asset is calculated and then adjusted to take
into account physical depreciation and obsolescence. Physical depreciation and obsolescence has been determined based on professional judgement regarding physical, economic and external
obsolescence factors relevant to the asset under consideration. For all leasehold improvement assets, the consumed economic benefit/asset obsolescence deduction is determined based on the
term of the associated lease.
NHMRC's policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.
7.4A: Fair Value Measurement
Fair value measurements
at the end of the reporting period
2016 2015
$'000
$'000
Category (Level
1, 2 or 3)
Non-financial assets
Plant and equipment 1 107 - 2
Valuation technique(s) and inputs used
Market Approach: This approach seeks to estimate the fair value
of an asset with reference to recent market transactions involving
identical or comparable assets.
Inputs: Prices and other relevant information generated by market
transactions involving plant and equipment assets were considered.
Plant and equipment 1 2,008 2,399 3
Depreciated Replacement Cost: The amount a market participant
would be prepared to pay to acquire or construct a substitute asset of
comparable utility, adjusted for physical depreciation and
obsolescence.
Inputs: Current costs per square metre of floor area relevant to the
location of the asset. Physical depreciation and obsolescence has
been determined based on the term of the associated lease.
Leasehold improvements 2 2,917 3,362 3
Depreciated Replacement Cost: The amount a market participant
would be prepared to pay to acquire or construct a substitute asset of
comparable utility, adjusted for physical depreciation and
obsolescence.
Inputs: Current costs per square metre of floor area relevant to the
location of the asset. Physical depreciation and obsolescence has
been determined based on the term of the associated lease.
Total non-financial assets 5,032 5,761
Total fair value measurements of assets in the statement of
financial statements 5,032 5,761
1. No change in valuation technique occurred during the period
2. Relationship of unobservable inputs to fair value: greater consumption of economic benefit or increased obsolescence lowers fair value
7.4B: Reconciliation for Recurring Level 3 Fair Value Measurements
Plant and Equipment
Non-financial assets
Leasehold Improvements
Total
2016 2015 2016 2015 2016 2015
$'000 $'000 $'000 $'000 $'000 $'000
As at 1 July 2,399 3,162 3,362 3,886 5,761 7,048
Total gains/(losses) recognised in net cost of services 1 (147) (918) (826) (524) (973) (1,442)
Total gains/(losses) recognised in other comprehensive
income 2 - - - - - -
Purchases 647 176 - - 647 176
Other movements (net effect of revaluation, reclassification of
PP&E to intangibles and transfers out of Level 3)
(789) (21) 381 - (408) (21)
Transfers into Level 3 3 - - - - - -
Transfers out of Level 3 4 (102) - - - (102) -
Total as at 30 June 2,008 2,399 2,917 3,362 4,925 5,761
1. These gains/(losses) are presented in the Statement of Comprehensive Income under Depreciation and Amortisation and Write Down and Impairment of Assets.
2. These gains/(losses) are presented in the Statement of Comprehensive Income under Other Changes in Asset Revaluation Reserves.
3. There have been no transfers into level 3 during the year.
4. There have been 77 transfers out of level 3 during the year.
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Annual Report of the National Health and Medical Research Council 2015–2016