I
annual report 2014
Notes to the Financial Statements
31 December 2014 (Cont’d)
70
4.
SIGNIFICANT ACCOUNTING POLICIES (cont’d)
4.8 Financial instruments (Cont’d)
(b)
Financial liabilities
Financial instruments are classified as liabilities or equity in accordance with the substance of the
contractual arrangement. A financial liability is classified into the following two (2) categories after initial
recognition for the purpose of subsequent measurement:
(i)
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss comprise financial liabilities that are held for
trading, derivatives (both, freestanding and embedded) and financial liabilities that were specifically
designated into this classification upon initial recognition.
Subsequent to initial recognition, financial liabilities classified as fair value through profit or loss
are measured at fair value. Any gains or losses arising from changes in the fair value of financial
liabilities classified as fair value through profit or loss are recognised in profit or loss. Net gains or
losses on financial liabilities classified as fair value through profit or loss exclude foreign exchange
gains and losses, interest and dividend income. Such income is recognised separately in profit or
loss as components of other income or other operating losses.
(ii)
Other financial liabilities
Financial liabilities classified as other financial liabilities comprise non-derivative financial liabilities
that are neither held for trading nor initially designated as fair value through profit or loss.
Subsequent to initial recognition, other financial liabilities are measured at amortised cost using
the effective interest method. Gains or losses on other financial liabilities are recognised in profit
or loss when the financial liabilities are derecognised and through the amortisation process.
A financial liability is derecognised when, and only when, it is extinguished, i.e. when the obligation
specified in the contract is discharged or cancelled or expires. An exchange between an existing borrower
and lender of debt instruments with substantially different terms are accounted for as an extinguishment
of the original financial liability and the recognition of a new financial liability. Similarly, a substantial
modification of the terms of an existing financial liability is accounted for as an extinguishment of the
original financial liability and the recognition of a new financial liability.
Any difference between the carrying amount of a financial liability extinguished or transferred to another
party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is
recognised in profit or loss.
A financial guarantee contract is a contract that requires the issuer to make specified payments to
reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in
accordance with the original or modified terms of a debt instrument.
The Group designates corporate guarantees given to banks for credit facilities granted to subsidiaries as
insurance contracts as defined in MFRS 4
Insurance Contracts
. The Group recognises these insurance
contracts as recognised insurance liabilities when there is a present obligation, legal or constructive, as
a result of a past event, when it is probable that an outflow of resources embodying economic benefits
would be required to settle the obligation and a reliable estimate can be made of the amount of the
obligation.
At the end of each reporting period, the Group assesses whether its recognised insurance liabilities are
adequate, using current estimates of future cash flows under its insurance contracts. If this assessment
shows that the carrying amount of the insurance liabilities is inadequate, the entire deficiency shall be
recognised in profit or loss.
Recognised insurance liabilities are only removed from the statements of financial position when, and
only when, it is extinguished via a discharge, cancellation or expiration.
