Fair value measurements

(a) Financial instruments recorded at fair value

The following tables summarize the valuation of OEH’s assets and liabilities by the fair value hierarchy at December 31, 2013 and 2012:



	Level 1	Level 2		Level 3	Total
December 31, 2013	$'000	$'000		$'000	$'000

Assets at fair value:
Derivative financial instruments	—	2		—	2

Total assets	—	2		—	2

Liabilities at fair value:
Derivative financial instruments	—	(4,890	)	—	(4,890	)

Total net liabilities	—	(4,888	)	—	(4,888	)



	Level 1	Level 2		Level 3	Total
December 31, 2012	$'000	$'000		$'000	$'000

Assets at fair value:
Derivative financial instruments	—	6		—	6

Total assets	—	6		—	6

Liabilities at fair value:
Derivative financial instruments	—	(8,879	)	—	(8,879	)

Total net liabilities	—	(8,873	)	—	(8,873	)

During the years ended December 31, 2013 and 2012, there were no transfers between levels of the fair value hierarchy.

The amount of total losses for the year ended December 31, 2013 included in earnings that are attributable to the change in unrealized gains or losses relating to those liabilities still held was $Nil (2012 - $Nil; 2011 - $Nil).

(b) Other financial instruments

Certain methods and assumptions are used to estimate the fair value of each class of financial instruments. The carrying amount of current assets and current liabilities as disclosed on the consolidated balance sheets approximate their fair value due to the short-term nature of those instruments.

The fair value of OEH's long-term debt, excluding interest rate swaps and caps, is determined using the contractual cash flows and credit-adjusted discount curves. The fair value of the debt is the present value of those contractual cash flows which are discounted at the current market cost of debt and adjusted for the credit spreads. Credit spreads take into consideration general market conditions, maturity and collateral.

The estimated carrying values, fair values, and levels of the fair value hierarchy of OEH's long-term debt as of December 31, 2013 and 2012 were as follows:



		December 31, 2013		December 31, 2012
		Carrying amounts $’000	Fair value $’000	Carrying amounts $’000	Fair value $’000

Long-term debt, including current portion, excluding obligations under capital leases	Level 3	543,567	562,588	521,494	533,783

Long-term debt, including current portion, held by consolidated variable interest entities	Level 3	96,150	97,775	97,945	99,656

The estimated fair values of OEH’s non-financial assets measured on a non-recurring basis for the years ended December 31, 2013, 2012 and 2011 were as follows:



		Fair value measurement inputs
	Fair value $’000	Level 1 $’000	Level 2 $’000	Level 3 $’000	Total losses in year ended December 31, 2013 $’000

Property, plant and equipment	45,000	—	—	45,000	(36,430	)

Property, plant and equipment of discontinued operations	—	—	—	—	(1,029	)

Goodwill of discontinued operations	—	—	—	—	(3,187	)

Intangible assets of discontinued operations	—	—	—	—	(2,815	)



		Fair value measurement inputs
	Fair value $’000	Level 1 $’000	Level 2 $’000	Level 3 $’000	Total losses in year ended December 31, 2012 $’000

Assets of discontinued operations held for sale	22,040	—	—	22,040	(3,166	)

Property, plant and equipment	3,521	—	—	3,521	(2,538	)

Goodwill	7,515	—	—	7,515	(2,055	)

Other assets	—	—	—	—	(1,299	)



		Fair value measurement inputs
	Fair value $’000	Level 1 $’000	Level 2 $’000	Level 3 $’000	Total losses in year ended December 31, 2011 $’000

Assets of discontinued operations held for sale	63,522	—	—	63,522	(65,144	)

Property, plant and equipment	6,000	—	—	6,000	(8,153	)

Goodwill	—	—	—	—	(11,907	)

Assets of discontinued operations held for sale

There were no impairments of assets held for sale in the year ended December 31, 2013. The assets and liabilities of Ubud Hanging Gardens, the results of which have been presented as a discontinued operation, have not been classified as held for sale as the hotel has not been disposed of through a sale transaction. See Note 4.

For the year ended December 31, 2012, assets of discontinued operations held for sale related to Porto Cupecoy real estate assets with a carrying value of $25,206,000 were written down to fair value of $22,040,000, resulting in a non-cash impairment charge of $3,166,000.

For the year ended December 31, 2011, assets of discontinued operations held for sale related to Keswick Hall with a carrying value of $43,934,000 (including the value of land held for property development) were written down to fair value of $20,000,000, resulting in a non-cash impairment charge of $23,934,000; assets of discontinued operations held for sale at Bora Bora Lagoon Resort were written down to fair value of $2,850,000, resulting in a non-cash impairment charge of $2,150,000; real estate assets held for sale at the Porto Cupecoy development were written down to their fair value, resulting in a non-cash impairment charge of $36,868,000 and, as part of an overall impairment calculation, property, plant and equipment at Porto Cupecoy with a carrying value of $1,677,000 were written down to fair value of $Nil; and goodwill of The Westcliff with a carrying value of $515,000 was written down to fair value of $Nil, resulting in a non-cash impairment charge of $515,000.

Any gains or losses on movements are included in earnings/(losses) from discontinued operations in the period incurred.

Property, plant and equipment

For the year ended December 31, 2013, property, plant and equipment at La Samanna with a carrying value of $80,680,000 was written down to fair value of $45,000,000, resulting in a non-cash impairment charge of $35,680,000, and property, plant and equipment at Grand Hotel Europe with a carrying value of $750,000 was written down to fair value of $Nil, resulting in a non-cash impairment charge of $750,000.

For the year ended December 31, 2012, train carriages of OEH's former Great South Pacific Express train which are held in Australia and not in service with a carrying value of $6,059,000 were written down to fair value of $3,521,000, resulting in a non-cash impairment charge of $2,538,000.

For the year ended December 31, 2011, property, plant and equipment at Casa de Sierra Nevada with a carrying value of $14,153,000 was written down to fair value of $6,000,000, resulting in a non-cash impairment charge of $8,153,000.

These impairments are included in earnings from continuing operations in the period incurred.

Property, plant and equipment of discontinued operations

For the year ended December 31, 2013, property, plant and equipment of Ubud Hanging Gardens with a carrying value of $1,029,000 was written down to fair value of $Nil, resulting in a non-cash impairment charge of $1,029,000.

This impairment is included in losses from discontinued operations in the period incurred.

Goodwill

For the year ended December 31, 2012, goodwill of Reid's Palace with a carrying value of $9,570,000 was written down to fair value of $7,515,000, resulting in a non-cash impairment charge of $2,055,000.

For the year ended December 31, 2011, goodwill of Maroma Resort and Spa, La Residencia and Mount Nelson Hotel with a carrying value of $11,907,000 was written down to fair value of $Nil, resulting in a non-cash impairment charge of $11,907,000.

These impairments are included in earnings from continuing operations in the period incurred.

Goodwill of discontinued operations

For the year ended December 31, 2013, goodwill at Ubud Hanging Gardens with a carrying value of $3,187,000 was written down to fair value of $Nil, resulting in a non-cash impairment charge of $3,187,000.

This impairment is included in losses from discontinued operations in the period incurred.

Intangible assets of discontinued operations

For the year ended December 31, 2013, intangible lease assets at Ubud Hanging Gardens with a carrying value of $2,815,000 were written down to a fair value of $Nil, resulting in a non-cash impairment charge of $2,815,000.

This impairment is included in losses from discontinued operations in the period incurred.

Other assets

For the year ended December 31, 2012, deferred costs associated with Great South Pacific Express with a carrying value of $1,299,000 were written down to fair value of $Nil resulting in a non-cash impairment charge of $1,299,000. These costs were written off as part of OEH's review of the uses of train carriage assets currently not in service in Australia, as described in the property, plant and equipment section above.

This impairment is included in earnings from continuing operations in the period incurred.