DEFINING DESIGN
QUALITY
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2.
Summary of significant accounting policies (cont’d)
Fair value measurement
Fair value is taken to be the price that would be received to sell an asset or paid to transfer a liability in an orderly
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 Group’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 to the financial statements); (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 Group 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 each reporting period. 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 disclosure of fair values of current financial instruments is not made when the carrying amounts of these current
financial instruments are a reasonable approximation of their fair values. The fair values of non-current financial
instruments may not be disclosed separately unless there are significant differences at the end of each reporting
period and in the event, the fair values are disclosed in the relevant notes to the financial statements.
Provisions
A liability or provision is recognisedwhen 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 estimate 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 expenditure expected to be required to settle the obligation using a pre-tax rate that reflects
current market assessment 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 period they occur.
Contingencies
A contingent liability is (a) a possible obligation that arises from past events and whose existence will be confirmed
only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control
of the Group; or (b) a present obligation that arises from past events but is not recognised because: (i) it is not
probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or (ii)
the amount of the obligation cannot be measured with sufficient reliability. A contingent asset is a possible asset
that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of
one or more uncertain future events not wholly within the control of the Group. Contingent liabilities and assets
are not recognised on the statement of financial position, except for contingent liabilities assumed in a business
combination that are present obligations and which the fair values can be reliably determined.
Notes to the Financial Statements
31 December 2014
