8. Fair value

8.1 Fair value of financial instrument

The fair value of financial instrument is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is therefore a market-based measurement and not specific to each entity.

All financial instruments, both assets and liabilities are initially recognized at fair value, which at that point is equivalent to the transaction price, unless there is evidence to the contrary in an active market. Subsequently, depending on the type of financial instrument, it may continue to be recognized at amortized cost or fair value through adjustments in the profit and loss or equity.

When possible, the fair value is determined as the market price of a financial instrument. However, for many of the financial assets and liabilities of the Group, especially in the case of derivatives, there is no market price available, so its fair value is estimated on the basis of the price established in recent transactions involving similar instruments or, in the absence thereof, by using mathematical measurement models that are sufficiently tried and trusted by the international financial community. The estimates of the fair value derived from the use of such models take into consideration the specific features of the asset or liability to be measured and, in particular, the various types of risk associated with the asset or liability. However, the limitations inherent in the measurement models and possible inaccuracies in the assumptions and parameters required by these models may mean that the estimated fair value of an asset or liability does not exactly match the price for which the asset or liability could be exchanged or settled on the date of its measurement.

The process for determining the fair value established in the Group to ensure that trading portfolio assets are properly valued, BBVA has established, at a geographic level, a structure of New Product Committees responsible for validating and approving new products or types of financial assets and liabilities before being contracted. The members of these Committees, responsible for valuation, are independent from the business (see Note 7).

These areas are required to ensure, prior to the approval stage, the existence of not only technical and human resources, but also adequate informational sources to measure these financial assets and liabilities, in accordance with the rules established by the Global Valuation Area and using models that have been validated and approved by the Department of Methodologies that reports to Global Risk Management.

Additionally, for financial assets and liabilities that show significant uncertainty in inputs or model parameters used for assessment, criteria is established to measure said uncertainty and activity limits are set based on these. Finally, these measurements are compared, as much as possible, against other sources such as the measurements obtained by the business teams or those obtained by other market participants.

The process for determining the fair value required the classification of the financial assets and liabilities according to the measurement processes used set forth below:

• Level 1: Measurement using market observable quoted prices for the financial instrument in question, secured from independent sources and referred to active markets - according to the Group policies. This level includes listed debt securities, listed equity instruments, some derivatives and mutual funds.
• Level 2: Measurement that applies techniques using inputs drawn from observable market data.
• Level 3: Measurement using techniques where some of the material inputs are not taken from market observable data. As of December 31, 2015, the affected instruments accounted for approximately 0.07% of financial assets and 0.03% of the Group’s financial liabilities registered at fair value. Model selection and validation is undertaken by control areas outside the market units.

Below is a comparison of the carrying amount of the Group’s financial instruments in the accompanying consolidated balance sheets and their respective fair values.

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Fair Value and Carrying Amount		Millions of euros
	Notes	2015		2014		2013
		Carrying Amount	Fair Value	Carrying Amount	Fair Value	Carrying Amount	Fair Value
ASSETS
Cash and balances with central banks	9	43,467	43,467	31,430	31,430	34,903	34,903
Financial assets held for trading	10	78,326	78,326	83,258	83,258	72,112	72,112
Other financial assets designated at fair value through profit or loss	11	2,311	2,311	2,761	2,761	2,413	2,413
Available-for-sale financial assets	12	113,426	113,426	94,875	94,875	77,774	77,774
Loans and receivables	13	457,644	466,354	372,375	373,397	350,945	364,120
Fair value changes of the hedges items in portfolio hedges of interest rate risk	14	45	45	121	121	98	98
Hedging derivatives	14	3,538	3,538	2,551	2,551	2,530	2,530
LIABILITIES-
Financial assets held for trading	10	55,203	55,203	56,798	56,798	45,648	45,648
Other financial liabilities designated at fair value through profit or loss	11	2,649	2,649	2,724	2,724	2,467	2,467
Financial liabilities at amortized cost	21	606,113	613,247	491,899	486,904	464,141	466,240
Fair value changes of the hedged items in portfolio hedges of interest rate risk.	14	358	358	-	-	-	-
Hedging derivatives	14	2,726	2,726	2,331	2,331	1,792	1,792

Not all financial assets and liabilities are recorded at fair value, so below we provide the information on financial instruments recorded at fair value and subsequently the information of those recorded at cost (including their fair value), although this value is not used when accounting for these instruments.

8.1.1 Fair value of financial instrument recognized at fair value

The following table shows the main financial instruments carried at fair value in the accompanying consolidated balance sheets, broken down by the measurement technique used to determine their fair value:

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Fair Value by Levels		Millions of euros
	Notes	2015			2014			2013
		Level 1	Level 2	Level 3	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3
ASSETS-
Financial assets held for trading	10	37,922	40,240	164	39,603	43,459	195	34,394	37,428	290
Loans and advances to customers		-	65	-	-	128	-	-	107	-
Debt securities		32,381	409	34	33,150	691	43	28,573	852	176
Equity instruments		4,336	106	93	4,923	17	77	4,596	111	58
Trading derivatives		1,205	39,661	36	1,530	42,623	76	1,225	36,358	56
Other financial assets designated at fair value through profit or loss	11	2,246	2	62	2,690	71	-	2,352	61	-
Loans and advances to credit institutions		-	-	62	-	-	-	-	-	-
Debt securities		173	-	-	666	71	-	603	61	-
Equity instruments		2,074	2	-	2,024	-	-	1,749	-	-
Available-for-sale financial assets	12	97,113	15,477	236	76,693	17,236	406	57,960	18,710	591
Debt securities		92,963	15,260	86	70,225	16,987	396	52,729	18,515	566
Equity instruments		4,150	217	150	6,468	249	10	5,231	195	25
Hedging derivatives	14	59	3,478	-	59	2,491	-	52	2,478	-
LIABILITIES-
Financial liabilities held for trading	10	14,074	41,079	50	13,627	43,135	36	8,459	37,172	17
Trading derivatives		1,037	41,079	34	1,880	43,135	36	931	37,172	17
Short positions		13,038	-	16	11,747	-	-	7,528	-	-
Adjustments to financial liabilities for macro-coverages	14	-	358	-	-	-	-	-	-	-
Other financial liabilities designated at fair value through profit or loss	11	-	2,649	-	-	2,724	-	-	2,467	-
Hedging derivatives	14	-	2,594	132	-	2,270	62	-	1,757	35

The heading “Available-for-sale financial assets” in the accompanying consolidated balance sheets as of December 31, 2015, 2014 and 2013 additionally includes €600 million, €540 million and €516 million for equity instruments, respectively, accounted for at cost, as indicated in the section of this Note entitled “Financial instruments at cost”.

In 2015, financial instruments carried at fair value corresponding to the companies that belong to Banco Provincial Group in Venezuela whose balance is denominated in bolivar fuerte are classified under Level 3 in the above tables (see Note 2.2.16.)

The following table sets forth the main valuation techniques, hypothesis and inputs used in the estimation of fair value of the financial instruments classified under Levels 2 and 3, based on the type of financial asset and liability and the corresponding balances as of December 31, 2015:

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Financial Instruments Level 2	Fair Value (Millions of euros)	Valuation technique(s)	Unobservable inputs
Loans and advances to customers		Present-value method (Discounted future cash flows)	– Prepayment rates – Issuer credit risk – Current market interest rates
Available-for-sale financial assets	65
Debt securities		Present-value method (Discounted future cash flows) Active price in inactive market Comparable pricing (Observable price in a similar market)	– Prepayment rates – Issuer credit risk – Current market interest rates – Brokers/dealers quotes – External contributing prices – Market benchmarks
Trading portfolio	409
Other financial assets at fair value through profit and loss	-
Available-for-sale financial assets	15,260
Equity Instruments		Comparable pricing (Observable price in a similar market)	- Brokers quotes - Market operations - NAVs published
Trading portfolio	106
Available-for-sale financial assets	2
Other financial liabilities		Present-value method (Discounted future cash flows)	– Prepayment rates – Issuer credit risk – Current market interest rates
Other financial liabilities designated at fair value through profit or loss	2,649
Derivatives		• Commodities: Discounted cash flows and moment adjustment • Credit products: Default model and Gaussian copula • Exchange rate products: Discounted cash flows, Black, Local Vol and Moment adjustment • Fixed income products: Discounted cash flows • Equity instruments: Local-Vol, Black, Moment adjustment and Discounted cash flows • Interest rate products: - Interest rate swaps, Call money Swaps y FRA: Discounted cash flows - Caps/Floors: Black, Hull-White y SABR - Bond options: Black - Swaptions: Black, Hull-White y LGM - Interest rate options: Black, Hull-White y SABR - Constant Maturity Swaps: SABR	– Exchange rates – Market quoted future prices – Market interest rates – Underlying assests prices: shares, funds, commodities – Market observable volatilities – Issuer credit spread levels – Quoted dividends – Market listed correlations
Trading derivatives
Trading asset portfolio	39,661
Trading liability portfolio	41,079
Hedging derivatives
Assets	3,478
Liability	2,594

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Financial Instruments Level 3	Fair Value (Millions of euros)	Valuation technique(s)	Unobservable inputs
Debt securities		Present-value method (Discounted future cash flows) Comparable pricing (Comparison with prices of similar instruments)	– Credit spread – Recovery rates – Interest rates – Market benchmark – Default correlation – Prices of similar instruments or market benchmark
Trading portfolio	34
Available-for-sale financial assets	86
Equity Instruments		Net Asset Value Comparable pricing (Comparison with prices of similar instruments)	– NAV provided by the administrator of the fund – Prices of similar instruments or market benchmark
Trading portfolio	93
Available-for-sale financial assets	150
Derivatives		Credit Option: Gaussian Copula	– Correlatio default – Credit spread – Recovery rates – Interest rate yields
Trading derivatives
Trading asset portfolio	36	Equity OTC Options : Heston	– Volatility of volatility – Interest rate yields – Dividends – Assets correlation
Trading liability portfolio	34
Hedging derivatives		Interest rate options: Libor Market Model	– Beta – Correlation rate/credit – Credit default volatility
Liability	132

Quantitative information of non-observable inputs used to calculate Level 3 valuations is presented below:

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Financial instrument	Valuation technique(s)	Significant unobservable inputs	Min	Max	Average	Units
	Debt Securities	Net Present Value	Credit Spread	264.00	320.00	264.23	b.p.
			Recovery Rate	0.25	40.00	39.99	%
	Comparable pricing	Price	0.25	89.41	51.50	%
Equity instruments	Net Asset Value	Net Asset Value (*)	-	-	-	-
	Comparable pricing	Price (*)	-	-	-	-
Credit Option	Gaussian Copula	Correlation Default	37.39	81.83	45.63	%
Corporate Bond Option	Black 76	Price Volatillity	4.46	6.30	5.91	Vegas
Equity OTC Option	Heston	Forward Volatility Skew	36.41	88.34	38.77	Vegas
Interest Rate Option	Libor Market Model	Beta	0.03	18.00	5.41	%
		Correlation Rate/Credit	(100.00)	100.00	(**)	%
		Credit Default Volatility	0.00	0.00	0.00	Vegas

(*) Range is not provided as it would be too wide to take into account the diverse nature of the different positions. (**) Depending on the sensitivity of the worst scenario transaction by transaction.

The main techniques used for the assessment of the main instruments classified in Level 3, and its main unobservable inputs, are described below:

• The net present value (net present value method): This model uses the future cash flows of each instrument, which are established in the different contracts, and discounted to their present value. This model often includes many observable market parameters, but may also include unobservable market parameters directly, as described below.
  • Credit Spread: represents the difference in yield of an instrument and the reference rate, reflecting the additional return that a market participant would require to take the credit risk of that instrument. Therefore, the credit spread of an instrument is part of the discount rate used to calculate the present value of future cash flows.
  • Recovery rate: defines how the percentage of principal and interest recovered from a debt instrument that has defaulted.
• Comparable prices (similar asset prices): prices of comparable instruments and benchmarks are used to calculate its yield from the entry price or current rating making further adjustments to account for differences that may exist between valued asset and it is taken reference. It can also be assumed that the price of an instrument is equivalent to the other.
• Net asset value: represents the total value of the financial assets and liabilities of a fund and is published by the fund manager thereof.
• Gaussian copula: dependent on credit instruments of various references, the joint density function to integrate to value is constructed by a Gaussian copula that relates the marginal densities by a normal distribution, usually extracted from the correlation matrix of events approaching default by CDS issuers.
• Heston: the model, typically applied to equity options assumes stochastic behavior of volatility. According to which, the volatility follows a process that reverts to a long-term level and is correlated with the underlying instrument. As opposed to local volatility models, in which the volatility evolves deterministically, the Heston model is more flexible, allowing it to be similar to that observed in the short term today.
• Libor market model: This model assumes that the dynamics of the interest rate curve can be modeled based on the set of forwards that compose the process. The correlation matrix is parameterized on the assumption that the correlation between any two forwards decreases at a constant rate, beta, to the extent of the difference in their respective due dates. The multifactorial frame of this model makes it ideal for the valuation of instruments sensitive to the slope or curve.

Adjustments to the valuation for risk of default

The credit valuation adjustments (“CVA”) and debit valuation adjustments (“DVA”) are a part of derivative valuations, both financial assets and liabilities, to reflect the impact in the fair value of the credit risk of the counterparty and its own, respectively.

These adjustments are calculated by estimating Exposure At Default, Probability of Default and Loss Given Default, for all derivative products on any instrument at the legal entity level (all counterparties under a same ISDA / CMOF) in which BBVA has exposure.

As a general rule, the calculation of CVA is done through simulations of market and credit variables to calculate the expected positive exposure, given the Exposure at Default and multiplying the result by the Loss Given Default of the counterparty. Consequently, the DVA is calculated as the result of the expected negative exposure given the Exposure at Default and multiplying the result by the Loss Given Default of the counterparty. Both calculations are performed throughout the entire period of potential exposure.

The information needed to calculate the exposure at default and the loss given default come from the credit markets (Credit Default Swaps or iTraxx Indexes), save for cases where an internal rating is available. For those cases where the information is not available, BBVA implements a mapping process based on the sector, rating and geography to assign probabilities of both probability of default and loss given default, calibrated directly to market or with an adjustment market factor for the probability of default and the historical expected loss.

The amounts recognized in the Consolidated balance sheet as of December 31, 2015 related to the valuation adjustments to the credit assessment of the asset derivative position as “Credit Valuation Adjustments” (“CVA”) and the liabilities derivative positions were -€297 million and €313 million respectively. The impact recorded under “Net gains (losses) on financial asset and liabilities” in the consolidated income statement corresponding to the mentioned adjustments was a net impact of -€109 million.

Financial assets and liabilities classified as Level 3

The changes in the balance of Level 3 financial assets and liabilities included in the accompanying consolidated balance sheets are as follows:

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	Millions of euros
	2015		2014		2013
Financial Assets Level 3 Changes in the Period	Assets	Liabilities	Assets	Liabilities	Assets	Liabilities
Balance at the beginning	601	98	881	52	1,165	55
	148	-	-	-	-	-
Valuation adjustments recognized in the income statement (*)	124	(100)	39	46	7	15
Valuation adjustments not recognized in the income statement	27	(123)	(43)	1	-	-
Acquisitions, disposals and liquidations (**)	(510)	89	(153)	(6)	(374)	(18)
Net transfers to Level 3	145	-	5	-	180	-
Exchange differences and others	(71)	219	(130)	5	(95)	(1)
Balance at the end	463	182	601	98	881	52

(*) Profit or loss that is attributable to gains or losses relating to those financial assets and liabilities held as of December 31, 2015, 2014 and 2013. Valuation adjustments are recorded under the heading “Net gains (losses) on financial assets and liabilities (net)”. (**) Of which, in 2015, the assets roll forward is comprised of €128 million of acquisitions, €175 millions of disposals and €463 millions of liquidations. The liabilities roll forward is comprised of €303 million of acquisitions and €215 million of disposals.

As of December 31, 2015, the profit/loss on sales of financial instruments classified as Level 3 recognized in the accompanying income statement was not material.

Transfers between levels

The Global Valuation Area, in collaboration with the Technology and Methodology Area, has established the rules for a proper portfolio asset and available-for-sale financial assets classification according to the fair value hierarchy defined by international accounting standards.

On a monthly basis, any new assets added to the portfolio are classified, according to this criterion, by the accounting subsidiary. Then, there is a quarterly review of the portfolio in order to analyze the need for a change in classification of any of these assets.

The financial instruments transferred between the different levels of measurement in 2015 are at the following amounts in the accompanying consolidated balance sheets as of December 31, 2015:

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	Millions of euros
	From:	Level 1		Level 2		Level 3
Transfer Between Levels	A:	Level 2	Level 3	Level 1	Level 3	Level 1	Level 2
ASSETS
Financial assets held for trading		36		159	86	-	10
Available-for-sale financial assets		140		481	74	18	5
Total		176		640	160	18	15
LIABILITIES-
Financial assets held for trading		2
Total		2

The amount of financial instruments that were transferred between levels of valuation for the year ended December 31, 2015 is not material relative to the total portfolios, basically corresponding to the above revisions of the classification between levels because these assets had modified some of its features. Specifically:

• The transfers between Tier 1 and 2 were produced mainly in debt securities, which are either no longer listed on an active market (transfer from Tier 1 to 2) or are just starting to be listed (transfer from Tier 2 to 1).
• The transfers from Tier 2 to Tier 3 are due mainly to equity instruments and debt securities for which observable data are not available in their valuation.
• The transfers from Tier 3 to Tier 2 are solely in equity instruments, for which observable market data are available for valuation.

Sensitivity Analysis

Sensitivity analysis is performed on financial instruments with significant unobservable inputs (financial instruments included in level 3), in order to obtain a reasonable range of possible alternative valuations. This analysis is carried out on a monthly basis, based on the criteria defined by the Global Valuation Area taking into account the nature of the methods used for the assessment and the reliability and availability of inputs and proxies used. In order to establish, with a sufficient degree of certainty, the valuating risk that is incurred in such assets without applying diversification criteria between them.

As of December 31, 2015, the effect on the consolidated income and consolidated equity of changing the main hypotheses used for the measurement of Level 3 financial instruments for other reasonably possible models, taking the highest (most favorable hypotheses) or lowest (least favorable hypotheses) value of the range deemed probable, would be as follows:

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	Millions of euros
	Potential Impact on Consolidated Income Statement		Potential Impact on Total Equity
Financial Assets Level 3 Sensitivity Analysis	Most Favorable Hypothesis	Least Favorable Hypothesis	Most Favorable Hypothesis	Least Favorable Hypothesis
ASSETS
Financial assets held for trading	14	(22)	-	-
Available-for-sale financial assets	-	-	1	(2)
LIABILITIES-
Financial liabilities held for trading	2	(2)	-	-
Total	16	(23)	1	(2)

8.1.2 Fair value of financial instruments carried at cost

The valuation methods used to calculate the fair value of financial assets and liabilities carried at cost are presented below:

• The fair value of "Cash and balances with central banks" approximates their book value, as it is mainly short-term balances.
• The fair value of the "Loans and advances to customers" and "financial liabilities at amortized cost" was estimated using the method of discounted expected future cash flows using market interest rates at the end of each year. Additionally, factors such as prepayment rates and correlations of default are taken into account.

The following table presents the fair value of key financial instruments carried at amortized cost in the accompanying consolidated balance sheets, broken down according to the method of valuation used for the estimation:

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		Millions of euros
	Notes	2015			2014			2013
		Level 1	Level 2	Level 3	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3
ASSETS-
Cash and balances with central banks	9	43,467	-	-	31,430	-	-	34,903	-	-
Loans and receivables	13	-	7,681	458,674	-	3,046	370,352		1,351	362,769
LIABILITIES-
Financial liabilities at amortized cost	21	-	-	613,247	-	-	486,904	-	-	466,240

The main valuation techniques, hypotheses and inputs used to estimate the fair value of financial instruments accounted for at cost and classified in levels 2 and 3 is shown below. These are broken down by type of financial instrument and the balances correspond to those as of December 31, 2015:

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Financial Instruments Level 2	Fair Value (Millions of euros)	Valuation technique(s)	Unobservable inputs
Loans and receivables		Present-value method (Discounted future cash flows)	– Credit spread – Interest rates
Debt securities	7,681

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Financial Instruments Level 3	Fair Value (Millions of euros)	Valuation technique(s)	Unobservable inputs
Loans and receivables		Present-value method (Discounted future cash flows)	– Credit spread – Prepayment rates – Market interest rates
Loans and advances to credit institutions	33,873
Loans and advances to customers	421,954
Debt securities	2,847
Financial liabilities at amortized cost		Present-value method (Discounted future cash flows)	– Credit spread – Prepayment rates – Market interest rates
Deposits from central banks	40,062
Deposits from credit institutions	71,027
Customer deposits	408,289
Debt certificates	64,373
Subordinated liabilities	17,130
Other financial liabilities	12,367

Financial instruments at cost

As of December 31, 2015, 2014 and 2013, there were equity instruments and certain discretionary profit-sharing arrangements in some entities which were recognized at cost in the Group’s consolidated balance sheets because their fair value could not be reliably determined, as they were not traded in organized markets and, thus, their unobservable inputs are significant. On the above dates, the balances of these financial instruments recognized in the portfolio of available-for-sale financial assets amounted to €600 million, €540 million and €516 million, respectively.

The table below outlines the financial assets and liabilities carried at cost that were sold in the years ended December 31, 2015, 2014 and 2013:

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	Millions of euros
Sales of Financial Instruments at Cost	2015	2014	2013
Amount of Sale	33	71	76
Carrying Amount at Sale Date	22	21	62
Gains/Losses	11	50	13

8.2 Assets measured at fair value on a nonrecurring basis

As indicated in Note 2.2.4, non-current assets held for sale are measured at the lower of their fair value less costs to sell and its carrying amount. As of December 31, 2015 nearly the entire book value of the non-current assets held for sale from foreclosures or recoveries match their fair value (see Note 15).The global valuation of the portfolio of assets has been carried out using a statistical methodology based on real estate and local macroeconomic variables.

Valuation standards

The overall rating of the portfolio of assets has been carried out using a statistical methodology based on real estate and local macroeconomic variables.

The individualized assessment of properties selected as sample has been carried out according to the "Appraisal and Valuation Standards" published by the Royal lnstitution of Chartered Surveyors (RICS) and the International Valuation Standards published by the lnternational Standard Valuation Committee (IVSC) complying with the requirements of the International Financial Reporting Standards adopted by the European Union ("EU-IFRS") in connection with estimating the fair value of tangible assets and the value-in-use of financial assets.

The details of each property which has been based each of the assessments are specified in the data sheet valuation of each asset.

Valuation Methodology

Overall valuation of real estate assets portfolio

The overall valuation of the portfolio of real estate assets at December 31, 2014 was performed from the latest appraisal values available. This value was corrected based on the following:

• Analysis of the property sales performed during the year and comparison of the value to sell these properties to the appraisal values obtained most recently. From this analysis derived a conclusion by type of property and location.
• Individual valuation of a material sample of the entire portfolio considering type of properties. The results obtained from these valuations have been compared with the adjusted values of the above analysis, obtaining a second conclusion by type and location.

Individual valuation of real estate assets sample

The basic methods used in the valuation were as follows:

• Comparative Market Method: the property under study is compared with others of similar characteristics which have been recently sold or are for sale on the market, making a comparative analysis, making adjustments due to factors that can cause differences, such as location, size, dimensions, shape, topography, access, urban classification, type of construction, age, storage, distribution, function, or design.
• Dynamic Residual Method: this is considered the most accurate method to conduct an appraisal of the poorly developed or undeveloped land, where there is minimal planning (use and a gross floor area) or a more defined development planning, since in these cases the market is often not very transparent. It starts from the consideration that the development and sale of finished real estate product is conceived from the beginning as a business project, as such it involves a risk, taking place in a time frame in which an initial capital investment occurs generating income and expenses. As such business project, the goal is to maximize profits and therefore the principle of highest and best use.
• Yield Method (DCF): the value of assets is determined by the profits that they could generate in the future (projections) discounted at an appropriate rate of discount. This is an overall assessment, reflecting the economic potential and profitability.

To calculate the value, once the market conditions have been analyzed, the following factors are taken into consideration:

• Size, location, and type of property.
• Current condition of the property market, sales price trends and rental competition in the real estate market or industry risk, adjusted based on the statistical information of local real estate and macroeconomic variables.
• The fullest and best use of the asset, which must be legally allowed, physically possible, economically viable, and provide the maximum possible value, supported in economic terms. Analysis of the fullest and best use contemplates its current condition, whether free and available, based on the mentioned appraisals.
• Market Value of the property, considering this as vacant and available for use, analyzing factors such as location, size, physical characteristics, similar transactions and value adjustments proposed by the current economic conditions.

Valuation Criteria

Real estate properties have been appraised individually considering a hypothetical stand-alone sale and not as part of a real estate portfolio type of sale.

The portfolio of assets held for sale by type of asset and inventories as of December 31, 2015 and 2014 is provided below by hierarchy of fair value measurements:

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		Millones of Euros
		Level 2		Level 3		Total
Assets measured at fair value on a nonrecurring basis	Note	2015	2014	2015	2014	2015	2014
Non-current Assets Held-for-Sale	15
Housing		2,192	2,045	98	9	2,291	2,054
Offices, warehouses and other		353	399	53	8	406	407
Land		12	-	236	237	248	237
TOTAL		2,557	2,444	388	255	2,945	2,699
Inventories	20
Housing		1,452	1,424	-	-	1,452	1,424
Offices, warehouses and other		647	628	-	-	647	628
Land		-	-	2,056	2,169	2,056	2,169
TOTAL		2,099	2,052	2,056	2,169	4,155	4,221

Since the amount classified in Level 3 (€388 million) is not significant compared to the total consolidated assets and that the inputs used in the valuation are very diverse depending on the type and geographic location, they have not been disclosed.