2. Significant accounting policies (CONT’D.)
2.5 Summary of significant accounting policies (cont’d.)
(s) Financial assets
Financial assets are recognised in the statements of financial position when, and only when, the Group
and the Company become a party to the contractual provisions of the financial instrument.
At initial recognition, financial assets are recognised at fair value plus, in the case of financial assets
not at fair value through profit or loss, directly attributable transaction costs.
Financial assets with fixed or determinable payments that are not quoted in an active market are
classified as loans and receivables. Loan and receivables of the Group and the Company comprise
receivables (excluding prepayments) and cash and bank balances.
Subsequent to initial recognition, loans and receivables are measured at amortised cost using the
effective interest method. Gains and losses are recognised in profit or loss when the loans and
receivables are derecognised or impaired, and through the amortisation process.
Loans and receivables are classified as current assets, except for those having maturity dates later
than 12 months after the reporting date, are classified as non-current.
A financial asset is derecognised when the contractual right to receive cash flows from the asset has
expired. On derecognition of a financial asset in its entirety, the difference between the carrying
amount and the sum of the consideration received and any cumulative gain or loss that had been
recognised in other comprehensive income is recognised in profit or loss.
(t) Impairment of financial assets
The Group and the Company assess at each reporting date whether there is any objective evidence
that a financial asset is impaired.
To determine whether there is objective evidence that financial assets are impaired, the Group and
the Company consider factors such as the probability of insolvency or significant financial difficulties
of the debtor and default or significant delay in payments. For certain categories of financial assets,
such as trade receivables, assets that are assessed not to be impaired individually are subsequently
assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence
of impairment for a portfolio of receivables could include the Group and the Company’s past
experience of collecting payments, an increase in the number of delayed payments in the portfolio
past the average credit period and observable changes in national or local economic conditions that
correlate with default on receivables.
If any such evidence exists, the amount of impairment loss is measured as the difference between the
asset’s carrying amount and the present value of estimated future cash flows discounted at the
financial asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
The carrying amount of a financial asset is reduced by the impairment loss directly for all financial
assets with the exception of trade receivables, where the carrying amount is reduced through the use
of an allowance account. When a trade receivable becomes uncollectible, it is written off against the
allowance account.
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 profit or loss.
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