viii.  Residential Development ix.  Other Financial Assets h)  Fair Value Measurement  i) Impairment Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.  Level 2 – Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or  liability through correlation with market data at the measurement date and for the duration of the asset’s or liability’s  anticipated life.  Level 3 – Inputs are unobservable and reflect management’s best estimate of what market participants would use in pricing the  asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and  the risk inherent in the inputs in determining the estimate.  Residential development lots, homes and residential condominium projects are recorded in inventory. Residential development  lots are recorded at the lower of cost, including pre-development expenditures and capitalized borrowing costs, and net realizable  value, which the company determines as the estimated selling price in the ordinary course of business, less estimated expenses. Homes and other properties held for sale, which include properties subject to sale agreements, are recorded at the lower of cost  and net realizable value in inventory. Costs are allocated to the saleable acreage of each project or subdivision in proportion to  the anticipated revenue. Other financial assets are classified as either fair value through profit or loss or available-for-sale securities based on their nature  and use within the company’s business. Changes in the fair values of financial instruments classified as fair value through profit  or loss and available-for-sale are recognized in net income and other comprehensive income, respectively. The cumulative  changes in the fair values of available-for-sale securities previously recognized in accumulated other comprehensive income  are reclassified to net income when the security is sold, or there is a significant or prolonged decline in fair value or when  the company acquires a controlling interest in the underlying investment and commences consolidating the investment. Other  financial assets are recognized on their trade date and initially recorded at fair value with changes in fair value recorded in  net income or other comprehensive income in accordance with their classification.  Fair values for financial instruments are  determined by reference to quoted bid or ask prices, as appropriate. Where bid and ask prices are unavailable, the closing price  of the most recent transaction of that instrument is used.  The company assesses the carrying value of available-for-sale securities for impairment when there is objective evidence  that the asset is impaired. When objective evidence of impairment exists, the cumulative loss in other comprehensive income is  reclassified to net income. Other financial assets also include loans and notes receivable which are recorded initially at fair value and, with the exception of  loans and notes receivable designated as fair value through profit or loss, are subsequently measured at amortized cost using the  effective interest method, less any applicable provision for impairment. A provision for impairment is established when there is  objective evidence that the company will not be able to collect all amounts due according to the original terms of the receivables.  Loans and receivables designated as fair value through profit or loss are recorded at fair value with changes in fair value recorded  for in net income in the period in which they arise. Fair value is 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 another  valuation technique. In estimating the fair value of an asset or a liability, the company takes into account the characteristics of  the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the  measurement date.  Fair value measurement is disaggregated into three hierarchical levels: Level 1, 2 or 3. Fair value hierarchical levels are directly  based on the degree to which the inputs to the fair value measurement are observable. The levels are as follows: Further information on fair value measurements is available in Note 6, Note 10, Note 11 and Note 12. At each balance sheet date the company assesses whether its assets, other than those measured at fair value with changes in  value recorded in net income, have any indication of impairment. An impairment is recognized if the recoverable amount,  determined as the higher of the estimated fair value less costs of disposal and the discounted future cash flows generated from  use and eventual disposal from an asset or cash-generating unit, is less than their carrying value. Impairment losses are recorded  as fair value changes within the Consolidated Statements of Operations. The projections of future cash flows take into account  the relevant operating plans and management’s best estimate of the most probable set of conditions anticipated to prevail. Where  an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the lesser of  the revised estimate of its recoverable amount and the carrying amount that would have been recorded had no impairment loss  been recognized previously. 2013 ANNUAL REPORT 91