8 NORTHERN COLLEGE OF APPLIED ARTS AND TECHNOLOGY Notes to Financial Statements Years ended March 31, 2013 and March 31, 2012 1. Significant accounting policies (continued): (h) Financial instruments: All financial instruments are initially recorded on the statement of financial position at fair value. All investments held in equity instruments that trade in an active market are recorded at fair value. Management has elected to record investments at fair value as they are managed and evaluated on a fair value basis. Transaction costs incurred on the acquisi tion of financial instruments measured subsequently at fair value are expensed as incurred. Financial instruments are classified into fair value hierarchy Levels 1, 2 or 3 for the purposes of describing the basis of the inputs used to determine the fair market value of those amounts recorded, as described below: Level 1 Fair value measurements ar e those derived from quoted prices (unadjusted) in active markets fo r identical assets or liabilities Level 2 Fair value measurements are those derived market-based inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly Level 3 Fair value measurements are t hose derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data