McPHERSON’S LIMITED

 ANNUAL REPORT 2015  

  

53

(E) FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS 

The following financial instruments held by the Group were measured and recognised at fair value at 30 June 2015 and 30 June 2014 on a recurring 

basis:

30 JUNE 2015

30 JUNE 2014

RECURRING FAIR VALUE MEASUREMENTS

LEVEL 1

$’000

LEVEL 2

$’000

LEVEL 3

$’000

TOTAL

$’000

LEVEL 1

$’000

LEVEL 2

$’000

LEVEL 3

$’000

TOTAL

$’000

Financial assets at fair value

Derivative financial instruments

-

1,951

-

1,951

-

-

-

-

Put Option

-

-

2,587

2,587

-

-

-

-

Total financial assets at fair value

-

1,951

2,587

4,538

-

-

-

-

Financial liabilities at fair value

Derivative financial instruments

-

2,812

-

2,812

-

4,832

-

4,832

Contingent consideration

-

-

6,637

6,637

-

-

12,885

12,885

Total financial liabilities at fair value

-

2,812

6,637

9,449

-

4,832

12,885

17,717

AASB 13 

Fair Value Measurement requires disclosure of fair value measurements by level using the following fair value measurement hierarchy:

Level 1: The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise 

the use of observable market data and rely as little as possible on entity-specific estimates.  If all significant inputs required to fair value an 

instrument are observable, the instrument is included in Level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.
The fair value of the derivative financial instruments is determined using valuation techniques. The Group uses a variety of methods and makes 

assumptions that are based on market conditions existing at the end of each reporting period.  The fair value of interest rate swaps is calculated as 

the present value of the estimated cash flows and the fair value of forward exchange and option contracts is determined using forward exchange 

market rates and volatilities at the end of the reporting period.
The following table presents the changes in level 3 instruments for the years ended 30 June 2015 and 30 June 2014:

FINANCIAL ASSET

FINANCIAL LIABILITY

PUT OPTION RECEIVABLE

$’000

CONTINGENT 

 CONSIDERATION PAYABLE

$’000

Opening balance as at 1 July 2013

-

9,040

Acquisitions (refer Note 31)

-

4,140

Adjustments arising from reassessment of the provision

-

(295)

Closing balance at 30 June 2014

-

12,885

Option value recognised on disposal of business (refer Note 14)

1,347

-

Adjustments arising from reassessment of the option / provision  
(refer Note 14 and Note 31 respectively)

1,240

(6,248)

Closing balance at 30 June 2015

2,587

6,637

The fair values of the Group’s put option receivable and provision for contingent consideration payable are determined using internal calculations 

which use relevant current and projected performance, the shareholder agreements, and contingent consideration agreements as inputs. Refer 

Notes 14 and 31 for further information.