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## Loans and receivables 

The Corporation's accounts receivable, which consist of trade receivables and accrued interest on loans receivable, are recorded initially at fair value. 

The Corporation's loans receivable are subsequently measured at amortized cost using the effective interest rate method. 

The fair value of the Corporation's loans receivable may differ from the carrying value due to changes in interest rates and the underlying risk associated with the debtor. It is determined using a discounted cash flow analysis. See note 8 for further details. 

## Other liabilities 

The Corporation's accounts payable and accrued liabilities and loans payable are short-term liabilities with carrying values that approximate their fair values as at December 31, 2013. 

The Corporation's long-term debt and finance lease obligations are recorded at amortized cost using the effective interest rate method. The carrying amount of indexed linked borrowings increases annually in line with the retail price index (“RPI”) with accretion being charged to the consolidated statement of income as interest expense. 

The fair value of the Corporation's long-term debt is determined using level 1 and level 2 inputs as follows: 

• Floating rate debt approximates its carrying value. 

Use level 1 inputs: 

• Convertible debentures are valued by multiplying the current market debenture price as per the Toronto Stock Exchange by the number of convertible shares outstanding as at year end. See note 19 for further details. 

• Irredeemable preferred shares for Bristol Water plc (shown as debt within these financial statements) are listed on the London Stock Exchange. Their fair value is determined by the quoted market price . 

Use level 2 inputs: 

• Fixed-rate debt is determined through the use of a discounted cash flow analysis using relevant risk-free bond rates plus an estimated margin. 

The carrying value of the Corporation's finance leases approximates fair value. 

The following table illustrates the classification of the Corporation's financial instruments that have been recorded at fair value as at December 31, 2013, within the fair value hierarchy: 

<img src='content_image/219276.jpg'>

No financial instruments were transferred between levels during the period. 

## Fair value continuity for level 3 inputs 

<img src='content_image/219277.jpg'>

