Page 104 - RB GRENADA ANNUAL REPORT 2025_ONLINE

104 • Republic Bank (Grenada) Limited 2025 Annual Report • FINANCIALS

Notes to the Financial Statements

For the year ended September 30, 2025. Expressed in Thousands of Eastern Caribbean dollars ($’000), except where otherwise stated.

2 Material accounting policies (continued)
2.5 Summary of material accounting policies (continued)
v Fair value (continued)

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. The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability takes place either:
i In the principal market for the asset or liability, or
ii In the absence of a principal market, in the most advantageous market for the asset or liability.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when
pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant that
would use the asset in its highest and best use.

The Bank uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available
to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable
inputs.

All assets and liabilities for which fair value is measured or disclosed in the Financial statements are categorised
within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value
measurement as a whole:

Level 1
Included in the Level 1 category are financial assets and liabilities that are measured in whole or in part by reference
to published quotes in an active market. A financial instrument is regarded as quoted in an active market if quoted
prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory
agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

Level 2
Included in the Level 2 category are financial assets and liabilities that are measured using a valuation technique
based on assumptions that are supported by prices from observable current market transactions and for which
pricing is obtained via pricing services, but where prices have not been determined in an active market. This includes
financial assets with fair values based on broker quotes, investments in private equity funds with fair values obtained
via fund managers and assets that are valued using the Bank’s own models whereby the majority of assumptions are
market observable.

Level 3
Included in the Level 3 category are financial assets and liabilities that are not quoted as there are no active markets
to determine a price. These financial instruments are held at cost, being the fair value of the consideration paid for
the acquisition of the investment, and are regularly assessed for impairment.

For assets and liabilities that are recognised in the Financial statements on a recurring basis, the Bank determines
whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest
level input that is significant to the fair value measurement as a whole) at the end of each reporting period.