2 BASIS OF PREPARATION (CONT'D) 2.5 Use of estimates and judgements (cont’d) Measurement of fair values (cont’d) When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: • Level 1: for unadjusted prices quoted in active markets for identical assets or liabilities; • Level 2: for inputs, other than quoted prices included in Level 1, that are observable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and • Level 3: for inputs that are based on unobservable market data. These unobservable inputs reflect the Group’s own assumptions about the assumptions that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances (which might include the Group’s own data). If inputs of different levels are used to measure the fair value of an asset or liability, the classification within the hierarchy is based on the lowest level input that is significant to the fair value measurement. 3 MATERIAL ACCOUNTING POLICY INFORMATION The accounting policies set out below have been applied by the Group consistently to the year presented in these financial statements except that in the current financial year, the Group has adopted all the IFRS Accounting Standards which are effective for annual financial period beginning on or after 1 January 2024. The adoption of these standards did not have any material effect on the financial performance or position of the Group. 3.1 Basis of consolidation Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The accounting policies of subsidiaries have been changed where necessary to align with the policies adopted by the Group. Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income or expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. 3.2 Foreign currency Foreign currency transactions and balances Items included in the financial statements of each entity in the Group are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to that entity. Transactions in foreign currencies are translated to the respective functional currencies of the Group’s entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at the reporting date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting year. 156 | MANULIFE US REIT NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2024
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