Chrysler 2015 Annual Report Download - page 153

2015 | ANNUAL REPORT 153
Fair Value measurement
Fair value for measurement and or disclosure purposes is determined as 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, regardless of
whether that price is directly observable or estimated using a valuation technique. The fair value measurement is based
on the presumption that the transaction to sell the asset or transfer the liability takes place either:
in the principal market for the asset or liability; or
in the absence of a principal market, in the most advantageous market for the asset or liability.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when
pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value
measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits
by using the asset in its highest and best use or by selling it to another market participant that would use the asset
in its highest and best use. In estimating fair value, we use market-observable data to the extent it is available. When
market-observable data is not available, we use valuation techniques that maximize the use of relevant observable
inputs and minimize the use of unobservable inputs.
IFRS 13 - Fair Value Measurement establishes a hierarchy, which prioritizes the inputs used in measuring fair value.
The hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets and liabilities
(level 1 inputs) and the lowest priority to unobservable inputs (level 3 inputs). In some cases, the inputs used to
measure the fair value of an asset or a liability might be categorized within different levels of the fair value hierarchy. In
those cases, the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy at the
lowest level input that is significant to the entire measurement.
Levels used in the hierarchy are as follows:
Level 1 inputs include quoted prices (unadjusted) in active markets for identical assets and liabilities that the Group
can access at the measurement date. Level 1 primarily consists of financial instruments such as cash and cash
equivalents and certain available-for-sale and held-for-trading securities.
Level 2 inputs include those which are directly or indirectly observable as of the measurement date. Level 2
instruments include commercial paper and non-exchange-traded derivatives such as over-the-counter currency
and commodity forwards, swaps and option contracts, which are valued using models or other valuation
methodologies. These models are primarily industry-standard models that consider various assumptions, including
quoted forward prices for similar instruments in active markets, quoted prices for identical or similar inputs not in
active markets, and observable inputs.
Level 3 inputs are unobservable from objective sources in the market and reflect management judgment about the
assumptions market participants would use in pricing the instruments. Instruments in this category include non-
exchange-traded derivatives such as over-the-counter commodity option and swap contracts.
Refer to Note 25 for additional information on fair value measurements.