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Note 19: Administered - Fair value measurements

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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 department 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.

19A: Fair value measurements

Fair value measurements at the end of the reporting period using
2015 2014 Category (Level 1,2 or 3) Valuation technique(s) Inputs used Range (weighted average) Sensitivity of the fair value measurement to changes in unobservable inputs
$'000 $'000
Non-financial assets
Buildings on freehold land 50,621 52,110 Level 3 Depreciated replacement cost (DRC) Replacement Cost New (price per square metre)
Consumed economic benefit/Obsolescence of asset
Leasehold improvements 14,239 14,753 Level 3 Depreciated replacement cost (DRC) Replacement Cost New (price per square metre)
Consumed economic benefit/Obsolescence of asset
Property, plant and equipment 882 941 Level 2 Market approach Adjusted market transactions
7,304 8,112 Level 3 Depreciated replacement cost (DRC) Replacement cost new
Consumed economic benefit/Obsolescence of asset
Investments in associates 9,020,667 8,526,732 Level 2 Market approach Net assets of entities
Investments in jointly controlled entities 119,599 115,200 Level 2 Market approach Net assets of entities
Total non-financial assets 9,213,312 8,717,848
Total fair value measurements of assets in the administered schedule of assets and liabilities 9,213,312 8,717,848
  1. The Department did not measure any non-financial assets on a non-recurring basis as at 30 June 2015 (2014: nil).
  2. There have been no changes to valuation techniques from the previous reporting period.

Fair value measurements - highest and best use

The Department's assets are held for operational purposes and not held for the purposes of deriving a profit. The current use of all controlled assets is considered their highest and best use.

Recurring and non-recurring Level 3 fair value measurements - valuation processes

The Department engaged Australian Valuation Solutions (AVS) to undertake a comprehensive valuation of the Property, plant and equipment asset class at 30 June 2015. All other classes were subject to a materiality review at 30 June 2015. The Department tests the procedures of the valuation models at least once every 12 months with a formal revaluation undertaken once every three years. If a particular asset class experiences significant and volatile changes in fair value (i.e. where indicators suggest that the value of the class has changed materially since the previous reporting period), that class is subject to specific valuation in the reporting period, where practicable, regardless of the timing of the last specific valuation.

The future economic benefits of the department's non-financial assets are not primarily dependent on their ability to generate cash flows. The Department has not disclosed quantitative information about the significant unobservable inputs for the level 3 measurements in these classes.

Significant Level 3 inputs utilised by the entity are derived and evaluated as follows:

Leasehold Improvements, Property, Plant and Equipment - Consumed economic benefit / Obsolescence of asset

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 cost (Depreciated Replacement Cost or DRC) approach. Under the DRC approach the estimated cost to replace the asset is calculated and then adjusted to take into account its consumed economic benefit / asset obsolescence (accumulated Depreciation). Consumed economic benefit / asset obsolescence has been determined based on professional judgement regarding physical, economic and external obsolescence factors relevant to the asset under consideration.

19B: Level 1 and Level 2 transfers for recurring fair value measurements

There have been no transfers between levels of the hierarchy during the year.

The Department's policy for determining when transfers between levels are deemed to have occurred can be found at Note 1.

19C: Reconciliation for recurring Level 3 fair value measurements

Recurring Level 3 fair value measurements - reconciliation for assets

Non-financial assets
Buildings Leasehold improvements Property, plant and equipment Total
2015 2015 2015 2015
$'000 $'000 $'000 $'000
As at 1 July 52,110 14,753 8,112 74,975
Total gains/(losses) recognised in other comprehensive income 1 303 303
Purchases 4,113 1,942 6,055
Depreciation (1,489) (4,627) (3,053) (9,169)
Other movements
Total as at 30 June 50,621 14,239 7,304 72,164
Changes in unrealised gains/(losses) recognised in net cost of services 2 303 303

Recurring Level 3 fair value measurements - reconciliation for assets

Non-financial assets
Buildings Leasehold improvements Property, plant and equipment Total
2014 2014 2014 2014
$'000 $'000 $'000 $'000
As at 1 July 7,200 2,312 9,512
Total gains/(losses) recognised in other comprehensive income 1 7,758 45 7,803
Purchases 1,685 9,577 6,767 18,029
Depreciation (1,131) (2,069) (967) (4,167)
Other movements 43,798 43,798
Total as at 30 June 52,110 14,753 8,112 74,975
Changes in unrealised gains/(losses) recognised in net cost of services 2 7,758 45 7,803

1 These gain/(losses) are presented in the Statement of Comprehensive Income under Other Comprehensive Income.

2 These unrealised gains/(losses) are presented in the Statement of Comprehensive Income under Other Comprehensive Income.

The Department's policy for determining when transfers between levels are deemed to have occurred can be found in Note 1.

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