2.2 Summary of material accounting policies
a) Financial instruments
i) Recognition and initial measurement
Trade receivables and debt securities issued are
initially recognised when they are originated. All
other financial assets and financial liabilities are
initially recognised when the Company becomes
a party to the contractual provisions of the
instrument. A financial asset or financial liability is
initially measured at fair value plus, for an item not
at fair value through profit and loss (FVTPL),
transaction costs that are directly attributable to
its acquisition or issue.
ii. Classification and subsequent measurement
Financial assets
On initial recognition, a financial asset is classified
as measured at:
• amortised cost;
• fair value through other comprehensive
income (FVOCI)-debt investment;
• fair value through other comprehensive
income (FVOCI)-equity investment; or
• FVTPL
Financial assets are not reclassified
subsequent to their initial recognition, except
if and in the period the Company changes its
business model for managing financial
assets.
A financial asset is measured at amortised
cost if it meets both of the following
conditions and is not designated as
FTVPL:
• the asset is held within a business model
whose objective is to hold assets to collect
contractual cash flows, and
• the contractual terms of the financial asset
give rise on specified dates to cash flows that
are solely payments of principal and interest
on the principal amount outstanding.
A debt investment is measured at FVOCI if it
meets both of the following conditions and is
not designated as FVTPL:
• the asset is held within a business model
whose objective is achieved by both
collecting contractual cash flows and selling
financial assets, and
• the contractual terms of the financial asset
give rise on specified dates to cash flows that
are solely payments of principal and interest
on the principal amount outstanding.
All financial assets not classified as
measured at amortised cost or FVOCI as
described above are measured at FVTPL.
On initial recognition, the Company may
irrevocably designate a financial asset that
otherwise meets the requirements to be
measured at amortised cost or at FVOCI as
at FVTPL if doing so eliminates or
significantly reduces an accounting
mismatch that would otherwise arise.
Financial asset: Business model assessment
The Company makes an assessment of the
objective of the business model in which a
financial asset is held at a portfolio level because
this best reflects the way the business is
managed and information is provided to
management, for instance the stated policies and
objectives for the portfolio, frequency, volume and
timing of sales of financial assets in prior periods,
the reasons for such sales and expectations
about future sales activity.
Transfers of financial assets to third parties in
transactions that do not qualify for derecognition
are not considered sales for this purpose,
consistent with the Company’s continuing
recognition of the assets.
Financial assets that are held for trading or are
managed and whose performance is evaluated
on a fair value basis are measured at FVTPL.
Financial assets: Assessment whether
contractual cash flows are solely payments of
principal and Interest.
For the purposes of this assessment, ‘principal’ is
defined as the fair value of the financial asset on
initial recognition. ‘Interest’ is defined as
consideration for the time value of money and for
the credit risk associated with the principal
amount outstanding during a particular period of
time and for other basic lending risks and costs
(e.g. liquidity risk and administrative costs), as
well as a profit margin.
In assessing whether the contractual cash flows
are solely payments of principal and interest, the
Company considers the contractual terms of the
instrument. This includes assessing whether the
financial asset contains a contractual term that
could change the timing or amount of contractual
cash flows such that it would not meet this
condition. In making this assessment, the
Company considers:
• contingent events that would change the
amount or timing of cash flows;
• terms that may adjust the contractual coupon
rates including variable interest rate features
and
• prepayment and extension features.
Financial assets: Subsequent measurement
and gains and losses
Financial assets at FVTPL
These assets are subsequently measured at fair
value. Net gains and losses, including any
interest or dividend income, are recognised in
profit or loss.
Financial assets at amortised cost
These assets are subsequently measured at
amortised cost using the effective interest
method. The amortised cost is reduced by
impairment losses. Interest income, foreign
exchange gains and losses and impairment are
recognised in profit or loss. Any gain or loss on
derecognition is recognised in profit or loss.
Debt investments at FVOCI
These assets are subsequently measured at fair
value. Interest income under the effective interest
method, foreign exchange gains and losses and
impairment are recognised in profit or loss. Other
net gains and losses recognised in OCI. On
derecognition, gains and losses accumulated in
OCI are reclassified to profit or loss.
Equity investments at FVOCI
These assets are subsequently measured at fair
value. Dividends are recognised as income in
profit or loss unless the dividend clearly
represents a recovery of part of the cost of the
investment. Other net gains and losses are
recognised in OCI and are not reclassified to profit
or loss.
Financial liabilities: Classification, subsequent
measurement and gains and losses
Financial liabilities are classified as measured at
amortised cost or FVTPL. A financial liability is
classified as at FVTPL if it is classified as held-for-
trading, or it is a derivative or it is designated as
such on initial recognition. Financial liabilities at
FVTPL are measured at fair value and net gains
and losses, including any interest expense, are
recognised in profit or loss.
Other financial liabilities are subsequently
measured at amortised cost using the effective
interest method. Interest expense and foreign
exchange gains and losses are recognised in
profit or loss. Any gain or loss on derecognition is
also recognised in profit or loss.
iii. Derecognition
Financial assets
The Company derecognises a financial asset
when the contractual rights to the cash flows from
the financial asset expire, or it transfers the rights
to receive the contractual cash flows in a
transaction in which substantially of the risks and
rewards of ownership of the financial asset are
transferred or in which the Company neither
transfers nor retains substantially all of the risks
and rewards of ownership and does not retain
control of the financial asset. If the Company
enters into transactions whereby it transfers
assets recognised on its balance sheet, but
retains either all or substantially all of the risks and
rewards of the transferred assets, the transferred
assets are not derecognised.
Financial liabilities
The Company derecognises a financial liability
when its contractual obligations are discharged or
cancelled, or expire. The Company also
derecognises a financial liability when its terms
are modified and the cash flows under the
modified terms are substantially different. In this
case, a new financial liability based on the
modified terms is recognised at fair value. The
difference between the carrying amount of the
financial liability extinguished and the new
financial liability with modified terms is recognised
in profit or loss.
iv. Offsetting
Financial assets and financial liabilities are offset
and the net amount presented in the balance
sheet when, and only when, the Company
currently has a legally enforceable right to set off
the amounts and it intends either to settle them on
a net basis or to the asset and settle the liability
simultaneously.
b) Intangible asset under development
Costs incurred on development of intangible assets are
classified as intangible assets under development.
c) Impairment
I. Impairment of financial instruments
The Company recognises loss allowances for
expected credit losses on financial assets
measured at amortised cost.
At each reporting date, the Company assesses
whether financial assets carried at amortised cost
and debt securities at FVOCI are credit impaired.
A financial asset is ‘credit- impaired’ when one or
more events that have a detrimental impact on the
estimated future cash flows of the financial asset
have occurred.
The Company measures loss allowances at an
amount equal to life time expected credit losses.
Loss allowances for trade receivables are always
measured at an amount equal to lifetime
expected credit losses. Lifetime expected credit
losses are the expected credit losses that result
from al l possible default events over the expected
life of a financial instrument.
12-month expected credit losses are the portion of
expected credit losses that result from default
events that are possible within 12 months after
the reporting date (or a shorter period if the
expected life of the instrument is less than 12
months).
In all cases, the maximum period considered
when estimating expected credit losses is the
maximum contractual period over which the
Company is exposed to credit risk.
The Company assumes that the credit risk on a
financial asset has increased significantly if it is
more than 30 days past due.
The Company considers a financial asset to be in
default when:
• the borrower is unlikely to pay its credit
obligations to the Company in full, without
recourse by
• the Company to actions such as realising
security (if any is held); or the financial asset
is 90 days or more past due
ii. Impairment of non-financial assets
The carrying amounts of assets are reviewed at
each reporting date if there is any indication of
impairment based on internal/external factors. An
impairment loss is recognized wherever the
carrying amount of an asset (or cash generating
unit) exceeds its recoverable amount. The
recoverable amount is the greater of the asset’s
(or cash generating unit’s) net selling price and
value in use. In assessing value in use, the
estimated future cash flows are discounted to
their present value using a pre-tax discount rate
that reflects current market assessments of the
time value of money and risks specific to the asset
(or cash generating unit).
An impairment loss is reversed if there has been a
change in the estimates used to determine the
recoverable amount. An impairment loss is
reversed only to the extent that the asset’s
carrying amount does not exceed the carrying
amount that would have been determined net of
depreciation or amortisation, if no impairment
loss had been recognised. The carrying amounts
of assets are reviewed at each reporting date if
there is any indication of impairment based on
internal/external factors. An impairment loss is
recognized wherever the carrying amount of an
asset (or cash generating unit) exceeds its
recoverable amount. The recoverable amount is
the greater of the asset’s (or cash generating
unit’s) net selling price and value in use. In
assessing value in use, the estimated future cash
flows are discounted to their present value using a
pre-tax discount rate that reflects current market
assessments of the time value of money and risks
specific to the asset (or cash generating unit) . An
impairment loss is reversed if there has been a
change in the estimates used to determine the
recoverable amount. An impairment loss is
reversed only to the extent that the asset’s
carrying amount.
For assets excluding goodwill, an assessment is
made at each reporting date to determine
whether there is an indication that previously
recognised impairment losses no longer exist or
have decreased. If such indication exists, the
Company estimates the asset’s or CGU’s
recoverable amount. A previously recognised
impairment loss is reversed only if there has been
a change in the assumptions used to determine
the asset’s recoverable amount since the last
impairment loss was recognised. The reversal is
limited so that the carrying of the asset does not
exceed its recoverable amount, nor exceed the
carrying amount that would have been
determined, net of depreciation, had no
impairment loss been recognised for the asset in
prior years. Such reversal is recognised in the
Statement of Profit or Loss unless the asset is
carried at a revalued amount, in which case, the
reversal is treated as an increase in revaluation.
|