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.

Note 5A: Fair Value Measurements
Fair value measurements at the end of the reporting period by hierarchy for assets and liabilities in 2014
    Fair value measurements at the end of the reporting period using  
  Fair value Level 1 inputs Level 2 inputs Level 3 inputs  
  $'000 $'000 $'000 $'000  
Non-financial assets          
Leasehold improvements 22,309 - 1,319 20,991  
Property, plant and equipment 7,510 - 6,029 1,481  
Total non-financial assets 29,819 - 7,347 22,472  
           
Assets not measured at fair value in the statement of financial position:  
Non-financial assets1 - - - -  
1. Fair Work Commission did not measure any non-financial assets at fair value on a non- recurring basis as at 30 June 2014.

The highest and best use of all non-financial assets are the same as their current use.

Fair value Measurement - Highest & Best Use

Fair Work Commission’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.

Note 5B: Level 1 and Level 2 transfers for recurring fair value measurements

Recurring fair value measurements transferred between Level 1 and Level 2 for assets and liabilities

There have been no transfers between levels of the hierarchy during the year.
        
Fair Work Commission’s policy for determining when transfers between levels are deemed to have occurred can be found in Note 1.

Note 5C: Valuation technique and inputs for Level 2 and Level 3 fair value measurements
Level 2 and 3 fair value measurements - valuation technique and the inputs used for assets in 2014
  Category (Level 2 or Level 3) Fair value Valuation technique(s)1 Inputs used Range (weighted average)2
Non-financial assets:          
Leasehold improvements (WIP) 2 1,319 Cost Replacement Cost New N/A
Leasehold improvements 3 20,991 Depreciated Replacement Cost (DRC) Replacement Cost New (price per square metre) N/A
        Consumed economic benefit / Obsolescence of asset 5.0% - 50.0% (6.4%) per annum
Property, plant and equipment (WIP) 2 2,108 Cost Replacement Cost New N/A
Property, plant and equipment 2 3,921 Market Approach Adjusted market transactions N/A
Property, plant and equipment 3 1,481 Depreciated Replacement Cost (DRC) Replacement Cost New N/A
        Consumed economic benefit / Obsolescence of asset 33.3% per annum
1. There have been no changes to valuation techniques.
2. Significant unobservable inputs only. Not applicable for assets or liabilities in the Level 2 category.
        
There were no significant inter-relationships between unobservable inputs that materially affect fair value.

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

Fair Work Commission procured the service of the Australian Valuation Office (AVO) to undertake a comprehensive valuation of all leasehold, plant and equipment assets and RHAS to undertake a comprehensive valuation of all artwork at 30 June 2012. Fair Work Commission tests the procedures of the valuation model as an internal management review 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.

There is no change in the valuation technique since the prior year.

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 judgment regarding physical, economic and external obsolescence factors relevant to the asset under consideration.

The weighted average is determined by assessing the fair value measurement as a proportion of the total fair value for the class against the total useful life of each asset.

Recurring Level 3 fair value measurements - sensitivity of inputs

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

The significant unobservable inputs used in the fair value measurement of Fair Work Commission's leasehold improvements, property, plant and equipment asset classes relate to the consumed economic benefit / asset obsolescence. A significant increase (decrease) in this input would result in a significantly lower (higher) fair value measurement.

Note 5D: Reconciliation for recurring Level 3 fair value measurements

Recurring Level 3 fair value measurements - reconciliation for assets

  Non-financial assets
  Leasehold improvements Property, plant and equipment Total
2014
$'000
  2014
$'000
2014
$'000
Open balance1 9,095 1,026 10,121
Total gains/(losses) in accumulated depreciation2 (1,025) (473) (1,497)
Purchases 12,921 928 13,849
Sales - - -
Issues - - -
Settlements - - -
Transfers into Level 33 - - -
Transfers out of Level 33 - - -
Closing balance 20,991 1,481 22,472
       
Changes in unrealised gains/(losses) recognised4 - - -
1. Open balance as determined in accordance with AASB 13

2. The presentation of these gains/(losses) in the Statement of Comprehensive Income will depend on Fair Work Commission.

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

4. The presentation of unrealised gains/(losses) in the Statement of Comprehensive Income will depend on Fair Work Commission.

Fair Work Commission’s policy for determining when transfers between levels are deemed to have occurred can be found in Note 1.

Table of contents