NOTES TO THE FINANCIAL STATEMENTS
31 December 2014
2.
Summary of significant accounting policies (cont’d)
2.10 Impairment of non-financial assets (cont’d)
The Group bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each
of the Group’s cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are
generally covering a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future
cash flows after the fifth year. Impairment losses are recognised in profit or loss.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses
may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s
recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used
to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying
amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have
been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit
or loss.
2.11 Financial assets
Initial recognition and measurement
Financial assets are recognised when, and only when, the Group becomes a party to the contractual provisions of the financial
instrument. The Group determines the classification of its financial assets at initial recognition.
When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value
through profit or loss, directly attributable transaction costs.
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as follows:
(a)
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading. Financial assets are classified
as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. This category includes
derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge
relationships as defined by FRS 39. Derivatives, including separated embedded derivatives are also classified as held for
trading unless they are designated as effective hedging instruments.
Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains
or losses arising from changes in fair value of the financial assets are recognised in profit or loss. Net gains or net losses
on financial assets at fair value through profit or loss exclude exchange differences, interest and dividend income.
Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their
economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not
measured at fair value with changes in fair value recognised in profit or loss. These embedded derivatives are measured
at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is a change in the
terms of the contract that significantly modifies the cash flows that would otherwise be required.
Hock Lian Seng Holdings Limited
Annual report 2014
53
