Notes to Consolidated Financial Statements [in thousands of Canadian dollars, except per share amounts] December 31, 2012 and 2011 Financial assets are classified at fair value through profit or loss [“FVPL”], available-for-sale [“AFS”] or loans and receivables.  Financial liabilities are classified as FVPL or other.  Financial instruments are recognized initially at fair value. Transaction costs that are directly attributable to the acquisition  or issue of a financial instrument classified as other than at FVPL are added to the carrying amount of the asset or liability.  The fair value of financial instruments is generally determined by reference to quoted market bid prices where an active  market exists. Where there is no active market, the fair value is determined using valuation techniques.  Financial instruments classified as FVPL are carried at fair value in the statement of financial position and any gains or  losses are recorded in net income in the period in which they arise. Financial instruments classified as FVPL include cash  and cash equivalents as well as an amount included in accounts payable and other liabilities. Financial assets classified as AFS are carried at fair value in the statement of financial position. Movements in the fair  value are recorded in other comprehensive income until disposed, at which time the cumulative amount recorded in  comprehensive income is recognized in net income. Where there is objective evidence that an AFS asset is impaired, the  cumulative impairment loss is reclassified from other comprehensive income to net income with subsequent movements  also recognized in net income. Financial assets classified as AFS include marketable securities. Loans and receivables and other financial liabilities are recognized at amortized cost using the effective interest rate  method. Such accounts include client and trust funds on deposits, accounts receivable, accounts payable and accrued  liabilities, dividends payable, client and trust funds payable and long-term debt. All financial instruments recognized at fair value in the consolidated statement of financial position are classifi ed into  three fair value hierarchy levels as follows:  Level 1 – valuation based on quoted prices (unadjusted) observed in active markets for identical assets or liabilities.  Level 2 – valuation techniques based on inputs that are quoted prices of similar instruments in active markets; quoted  prices for identical or similar instruments in markets that are not active; inputs other than quoted prices used in a valuation  model that are observable for that instrument; and inputs that are derived from or corroborated by observable market  data by correlation or other means.  Level 3 – valuation techniques with significant unobservable market inputs. 54 Financial instruments 