2.
Summary of significant accounting policies (cont’d)
2.13 Impairment of financial assets (cont’d)
(a) Financial assets carried at amortised cost (cont’d)
When the asset becomes uncollectible, the carrying amount of impaired financial asset is reduced directly or if an amount
was charged to the allowance account, the amounts charged to the allowance account are written off against the carrying
value of the financial asset.
To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the
Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default
or significant delay in payments.
If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to
an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the
extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of
reversal is recognised in the profit or loss.
(b) Financial assets carried at cost
If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates,
probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial assets
carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying
amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar
financial asset. Such impairment losses are not reversed in subsequent periods.
(c) Available-for-sale financial assets
In the case of equity investments classified as available-for-sale, objective evidence of impairment include (i) significant
financial difficulty of the issuer or obligor, (ii) information about significant changes with an adverse effect that have
taken place in the technological, market, economic or legal environment in which the issuer operates, and indicates that
the cost of the investment in equity instrument may not be recovered; and (iii) a significant or prolonged decline in the
fair value of the investment below its costs. ‘Significant’ is to be evaluated against the original cost of the investment
and ‘prolonged’ against the period in which the fair value has been below its original cost.
If an available-for-sale financial asset is impaired, an amount comprising the difference between its acquisition cost (net
of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in
profit or loss, is transferred from other comprehensive income and recognised in profit or loss. Reversals of impairment
losses in respect of equity instruments are not recognised in profit or loss; increase in their fair value after impairment
are recognised directly in other comprehensive income.
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014
Hock Lian Seng Holdings Limited
Annual report 2014
56
