2.
Summary of significant accounting policies (cont’d)
2.16 Financial liabilities (cont’d)
Subsequent measurement
The measurement of financial liabilities depends on their classification as follows:
i)
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading. Financial liabilities are
classified as held for trading if they are acquired for the purpose of selling 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. Separated embedded derivatives are also classified as held for trading unless they are designated as
effective hedging instruments.
Subsequent to initial recognition, financial liabilities 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 liabilities are recognised in profit or loss.
The Group has not designated any financial liabilities upon initial recognition at fair value through profit or loss.
ii)
Financial liabilities at amortised cost
After initial recognition, financial liabilities that are not carried at fair value through profit or loss are subsequently
measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when
the liabilities are de-recognised, and through the amortisation process.
De-recognition
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing
liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the
recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.
2.17 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the amount of
the obligation can be estimated reliably.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer
probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of
the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the
risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as
a finance cost.
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014
Hock Lian Seng Holdings Limited
Annual report 2014
59
