Basically we use a similar syatem to worzella.
You also use your professional ability as well. So, for example, if you have a child who is on a level 4, but who's ability is obviously higher than that (by questions and answers in class etc) yuo menraly adjust the statistics. You may then look for reasons why this child arrived in your class already under performing.
We don't just depend on SATs results, but use a battery of others, including one currently underdevelpoment by a group of Oxford academics.
Contrary to what people feel, we do take this sort if thing very seriously. I feel that we have a much better, and fairer handle on where a child is in terms of their attainment than simply giving marks out of 100 and a place in class.
And studies have shown that giving position in class is positivly harmful to students making progress.
If you give a class a mark the only thing that they concentrate on is where they came, and who beat who. They don't use the feed back to improve their understanding, to make progress.
If you give them comments they can take the information on board and get better.
I'm not doing this out of some wishy washy 'all children are the same' view on life. I'm doing it because if I do the children learn more.
In the end, I would rather my child reached their potential and came bottom of the class, than marked time and can 5th. Wouldn't you?