Annual Report 2016/17

THE AMERICAN CLUB

NOTES TO FINANCIAL STATEMENTS 30 June 2017

4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL MANAGEMENT (cont’d)

Fair value hierarchy

The Club classifies fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

• Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date

• Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices), and

• Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs)

During the current financial year, there were no transfers of financial instruments between the levels of the fair value hierarchy.

Determination of fair value

Unquoted mutual funds: Fair value is determined directly by reference to the valuation report by the investment advisors of the investment funds. The GAP uses the Net Asset Value (“NAV”) to determine the fair value of all the underlying investments which (a) do not have a readily determinable fair value and (b) either have the attributes of an investment company or prepare their financial statements consistent with the measurement principles of an investment company. Alternative investments: These investments are valued using valuation models which use both observable and non-observable data. The non-observable inputs to the models include assumptions regarding the future financial performance of the investee, its risk profile, and economic assumptions regarding the industry and geographical jurisdiction in which the investee operates.

48 2016/17 ANNUAL REPORT