b'Annual Report & Accounts 2022 Mercia Asset Management PLC 103Fair value measurementsThe fair values of the Groups financial assets and liabilities are considered a reasonable approximation to the carrying values shown in the consolidated statement of financial position. Subsequent to their initial recognition at fair value, measurements of movements in fair values of financial instruments are grouped into Levels 1 to 3, based on the degree to which the fair value is observable. The fair value hierarchy used is outlined in more detail in note 2 to these consolidated financial statements.The following table gives information about how the fair values of these financial assets and financial liabilities are determined and presents the Groups assets measured at fair value as at 31 March 2022. There have been no movements in financial assets or financial liabilities between levels during the current or prior years. The table in note 17 of these consolidated financial statements sets out the movement in the Level 1 and 3 financial assets from the start to the end of the year.As at As at31 March 31 March2022 2021000 000Assets: Financial statementsFinancial assets at fair value through profit or lossdirect investment portfolioLevel 1 1,632 4,488Level 2Level 3 117,926 91,732119,558 96,220As at As at31 March 31 March2022 2021000 000Liabilities:Financial liabilities at fair value through profit or lossdeferred considerationLevel 1Level 2Level 3 2,869 4,4472,869 4,447The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate to their fair values.Financial instruments in Level 1The Group had one direct investment listed on AIM, MyHealthChecked plc, which is valued using the closing bid price as at 31 March 2022.Financial instruments in Level 3If one or more of the significant inputs required to fair value an instrument is not based on observable market data, the instrument is included in Level 3. Apart from the one investment classified in Level 1, all other investments held in the Groups direct investment portfolio have been classified in Level 3 of the fair value hierarchy and the individual valuations for each of the companies have been arrived at using appropriate valuation techniques.The Group has adopted the International Private Equity and Venture Capital Valuation Guidelines (IPEVCVG) for determining its valuation techniques, which specify that the price of a recent investment represents one of a number of inputs used to arrive at fair value, and uses a single classification for all Level 3 investments.Note 2 to these consolidated financial statements provides further information on the Groups valuation methodology, including a detailed explanation of the valuation techniques used for Level 3 financial instruments. A reconciliation of the movement in Level 1 and 3 financial assets from 1 April to 31 March is disclosed in note 17 of these consolidated financial statements, and on an individual direct investment basis within the Chief Investment Officers review on page 15.'