NOTES TO THE CONSOLIDATED FINANCIAL  STATEMENTS  2.  Basis of preparation and accounting policies (cont’d) 2.3  Summary of significant accounting policies (cont’d) (d)  Fair value measurement (cont’d) (e)  Foreign currency translation Transactions and balances China Yuchai International Limited | Annual Report 2013 42 (RMB AND US$ AMOUNTS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)  For assets and liabilities that are recognized in the financial statements on a recurring basis, the Group  determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization  (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each  reporting period. For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the  basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as  explained above. An analysis of fair values of financial instruments and further details as to how they are measured are provided  in Note 33. The Company’s functional currency is US Dollar. The Group’s consolidated financial statements are presented in  Renminbi, which is also the functional currency of Yuchai, the largest operating segment of the Group. Each entity in the Group determines its own functional currency, and items included in the financial statements  of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional  currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency  spot rate of exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognized in profit or loss with  the exception of monetary items that are designated as part of the hedge of the Group’s net investment of  a foreign operation. These are recognized in OCI until the net investment is disposed of, at which time, the  cumulative amount is reclassified to profit or loss. Tax charges and credits attributable to exchange differences  on those monetary items are also recorded in OCI. l  Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value  measurement is directly or indirectly observable l  Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value  measurement is unobservable