Notes to the financial statements (continued) Section 4: Debt and equity (continued) 21. Recognised fair value measurements A. Fair value hierarchy 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. For the reporting dates presented, Western Power measured and recognised the below assets and liabilities at fair value disclosed by the following fair value hierarchy levels: • Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). • Level 3: Inputs from the asset or liability that are not based on observable market data (unobservable inputs). It is Western Power’s policy to recognise transfers into and out of the fair value hierarchy levels at the end of each reporting year. As at 30 June 2025, there were no transfers between levels for recurring fair value measurements (30 June 2024: no transfers). See table 50 below. B. Critical accounting estimates and judgements: valuation techniques used to derive level 2 fair values Recurring fair value measurements The fair value of derivatives in active markets is based on quoted market prices at the end of the reporting year. Where derivatives are entered into that are not traded in active markets the fair value is determined using valuation techniques.
These techniques maximise the use of observable market data where it is available and rely as little as possible on specific estimates. In some instances, independent valuations from the provider of the instrument are used. If all significant inputs required to fair value an instrument are based on observable market data, or the valuation is independently calculated by the provider of the instrument, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data the instrument is included in level 3. During the reporting year ended 30 June 2025, level 3 valuation techniques were not used (30 June 2024: not used). Specific valuation techniques used to value derivative financial instruments (as relevant) include the following: • the fair value of interest rate swaps is calculated at the present value of the estimated future cash flows based on a combination of observable BBSW reference rates and AUD interest rate swap curves • the fair value of forward exchange contracts is determined using a combination of observable forward foreign exchange rates, BBSW reference rates and AUD interest rate swap curves as at the reporting date • the fair value of fixed rate forward domestic borrowing commitments is independently calculated by the WATC, the provider of these instruments. All of the resulting fair value estimates are included in level 2. For the potential impact to Western Power’s annual post-tax profit and other comprehensive income due to movements in the key observable inputs being interest and foreign exchange rates, refer to the ‘Sensitivity analysis’ in note 17(b)(iii).
Table 50: Fair value hierarchy
2024/25
2023/24
Level 1 $M
Level 2 $M
Level 3 $M
Total $M
Level 1 $M
Level 2 $M
Level 3 $M
Total $M
Financial assets Derivative financial instruments Financial liabilities Derivative financial instruments
- -
5 28
- -
5 28
- -
29 -
- -
29 -
Western Power Annual Report 2025
125
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