NOTES TO THE FINANCIAL STATEMENTS
(CONT’D)
31 DECEMBER 2015
2.
SIGNIFICANT ACCOUNTING POLICIES AND OTHER EXPLANATORY INFORMATION (CONT’D)
2A.
Significant accounting policies (cont’d)
Financial assets
Initial recognition, measurement and derecognition:
A financial asset is recognised on the statements of financial position when, and only when, the entity becomes
a party to the contractual provisions of the instrument. The initial recognition of financial assets is at fair value
normally represented by the transaction price. The transaction price for financial asset not classified at fair value
through profit or loss includes the transaction costs that are directly attributable to the acquisition or issue of
the financial asset. Transaction costs incurred on the acquisition or issue of financial assets classified at fair value
through profit or loss are expensed immediately. The transactions are recorded at the trade date. When the
settlement date accounting is applied, any change in the fair value of the asset to be received during the period
between the trade date and the settlement date is recognised in net profit or loss for assets classified as trading.
Irrespective of the legal form of the transactions performed, financial assets are derecognised when they pass
the “substance over form” based on the derecognition test prescribed by FRS 39 relating to the transfer of risks
and rewards of ownership and the transfer of control. Financial assets and financial liabilities are offset and the
net amount is reported in the statements of financial position if there is currently a legally enforceable right to
offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle
the liabilities simultaneously.
Subsequent measurement:
Subsequent measurement based on the classification of the financial assets in one of the following four categories
under FRS 39 is as follows:
1.
Financial assets at fair value through profit or loss: Assets are classified in this category when they are
incurred principally for the purpose of selling or repurchasing in the near term (trading assets) or are
derivatives (except for a derivative that is a designated and effective hedging instrument) or have been
classified in this category because the conditions are met to use the “fair value option” and it is used.
All changes in fair value relating to assets at fair value through profit or loss are recognised directly in
profit or loss.
2.
Loans and receivables: Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. Assets that are for sale immediately
or in the near term are not to be classified in this category. These assets are carried at amortised costs
using the effective interest method (except that short-duration receivables with no stated interest
rate are normally measured at original invoice amount unless the effect of imputing interest would be
significant) minus any reduction (directly or through the use of an allowance account) for impairment
or uncollectibility.
Impairment charges are provided only when there is objective evidence that an impairment loss has
been incurred as a result of one or more events that occurred after the initial recognition of the asset
(a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the
financial asset or group of financial assets that can be reliably estimated. The methodology ensures that
an impairment loss is not recognised on the initial recognition of an asset. Losses expected as a result of
future events, no matter how likely, are not recognised. For impairment, the carrying amount of the asset
is reduced through use of an allowance account. The amount of the loss is recognised in profit or loss.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the
impairment loss was recognised. Typically the trade and other receivables are classified in this category.
ANNUAL REPORT 2015
85
