Level 2 is to measure the price with the similar items in the inactive market where have a lack of value-relevant information and transactions (Deloitte, 2014), and the input in level 2 need to be adjusted, Moreover, if the input is unobservable the fair value may be classified into level 3. Level 3 is the measurement of fair value have no reference substance in the market, and the inputs have to be estimated the inputs must be developed to reflect the assumptions that market participants would use when determining an appropriate price for the asset that market participants would use (Deloitte, 2014). The use of unobservable inputs in level 3 need to be minimised and the use of observable inputs should be maximised in the active market (accaglobal, …show more content…
From the M&S 2016 annual report, it can be seen that the main non-current assets of M&S are Goodwill, Computer software, Property, plant and equipment, the value of these non-current assets are £82.7, £527.7, £234.7 million respectively (Marks and Spencer, 2016). The techniques M&S used to measure the fair value do not only rely on data from the observable market, for example, M&S used to have joint venture partnerships with Lima (Bradford) S.à r.l., M&S recorded the fair value of the embedded derivative based on the 35 years rent’s present value with the movement of Retail Price Index (RPI), then discount back to the valuation date (Marks and Spencer,