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 liabilities (cont’d)
Initial recognition, measurement and derecognition (cont’d):
The initial recognition of financial liability is at fair value normally represented by the transaction price. The
transaction price for financial liability 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 liability. Transaction costs incurred on
the acquisition or issue of financial liability classified at fair value through profit or loss are expensed immediately.
The transactions are recorded at the trade date. Financial liabilities including bank and other borrowings are
classified as current liabilities unless there is an unconditional right to defer settlement of the liability for at least
12 months after the end of the reporting year.
Subsequent measurement:
Subsequent measurement based on the classification of the financial liabilities in one of the following two
categories under FRS 39 is as follows:
1.
Liabilities at fair value through profit or loss: Liabilities are classified in this category when they are
incurred principally for the purpose of selling or repurchasing in the near term (trading liabilities) 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.
Financial guarantee contracts if significant are initially recognised at fair value and are subsequently
measured at the greater of (a) the amount determined in accordance with FRS 37 and (b) the amount
initially recognised less, where appropriate, cumulative amortisation recognised in accordance with
FRS 18. All changes in fair value relating to liabilities at fair value through profit or loss are charged to
profit or loss as incurred.
2.
Other financial liabilities: All liabilities, which have not been classified in the previous category fall into
this residual category. These liabilities are carried at amortised cost using the effective interest method.
Trade and other payables and borrowings are usually classified in this category. Items classified within
current trade and other payables are not usually re-measured, as the obligation is usually known with
a high degree of certainty and settlement is short-term.
Fair value measurement
Fair value is taken to be 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 (that is, an exit price). It is a market-based
measurement, not an entity-specific measurement. Whenmeasuring fair value, management uses the assumptions
that market participants would use when pricing the asset or liability under current market conditions, including
assumptions about risk. The entity’s intention to hold an asset or to settle or otherwise fulfil a liability is not taken
into account as relevant when measuring fair value.
In making the fair value measurement, management determines the following: (a) the particular asset or liability
being measured (these are identified and disclosed in the relevant notes below); (b) for a non-financial asset, the
highest and best use of the asset and whether the asset is used in combination with other assets or on a stand-
alone basis; (c) the market in which an orderly transaction would take place for the asset or liability; and (d) the
appropriate valuation techniques to use when measuring fair value. The valuation techniques used maximise
the use of relevant observable inputs and minimise unobservable inputs. These inputs are consistent with the
inputs a market participant may use when pricing the asset or liability.
ANNUAL REPORT 2015
87
