Reinet Investments S.C.A. Annual Report and Accounts 2010
37
REINET
4. FINANCIAL RISKS CONTINUED
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the
basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance
of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs
that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the
significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific
to the asset or liability.
The determination of what constitutes `observable' requires significant judgement by Reinet. Reinet considers observable data
to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and
provided by independent sources that are actively involved in the relevant market.
The following table analyses, within the fair value hierarchy, Reinet's financial assets measured at fair value at 31 March 2010:
Level 1
Level 2
Level 3
Total
Assets
m
m
m
m
Financial assets held for trading:
Equity securities
200
200
Financial assets designated at fair value through profit or loss at inception:
Equity securities
2 164
87
2 251
Total financial assets
2 364
87
2 451
Investments whose values are based on quoted market prices in active markets, and therefore classified within level 1, include
active listed equities. Reinet does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices,
dealer quotations or alternative pricing sources supported by observable inputs are classified within level 2. These include listed
equities. As level 2 investments include positions that are not traded in active markets and/or are subject to transfer restrictions,
valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market
information.
Investments classified within level 3 have significant unobservable inputs, as they trade infrequently. Level 3 instruments
include unlisted investments. As observable prices are not available for these securities, Reinet has used valuation techniques
to derive the fair value.
The following table presents the movement in level 3 instruments for the year ended 31 March 2010:
Total
m
Opening balance
46
Purchases
71
Sales
(5)
Transfers into level 3
Gains and losses recognised in profit and loss
(25)
Closing balance
87
Total gains or losses for the year included in the statement of comprehensive income for assets held at the end of the year
(23)