BUILDING LANDMARKS, CHARTING GROWTH
205
Annual Report 2015
NOTES TO THE FINANCIAL STATEMENTS
3 SIGNIFICANT ACCOUNTING POLICIES
(continued)
3.9 Impairment
(i)
Non-derivative financial assets
A financial asset not carried at fair value through profit or loss, including an interest in an associate and joint venture,
is assessed at the end of each reporting period to determine whether there is objective evidence that it is impaired.
A financial asset is impaired if objective evidence indicates that a loss event(s) has occurred after the initial
recognition of the asset, and that the loss event(s) has an impact on the estimated future cash flows of that asset
that can be estimated reliably.
Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency
by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise,
indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or
issuers in the group, economic conditions that correlate with defaults or the disappearance of an active market for a
security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below
its cost is objective evidence of impairment.
Loans and receivables
The Group considers evidence of impairment for loans and receivables at both a specific asset and collective level.
All individually significant loans and receivables are assessed for specific impairment. All individually significant loans
and receivables found not to be specifically impaired are then collectively assessed for any impairment that has been
incurred but not yet identified. Loans and receivables that are not individually significant are collectively assessed for
impairment by grouping together loans and receivables with similar risk characteristics.
In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries
and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit
conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash flows, discounted at the asset’s
original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against
loans and receivables. Interest on the impaired asset continues to be recognised. When the Group considers that
there are no realistic prospects of recovery of the asset, the relevant amounts are written off. If the amount of
impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the
impairment was recognised, then the previously recognised impairment loss is reversed through profit or loss.
Available-for-sale financial assets
Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the
fair value reserve in equity to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the
difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value,
less any impairment loss recognised previously in profit or loss. Changes in cumulative impairment provisions
attributable to application of the effective interest method are reflected as a component of interest income. In a
subsequent period, the fair value of an impaired available-for-sale equity security increases and the increase can be
related objectively to an event occuring after the impairment loss was recognised, then the impairment loss is
reversed. The amount of the reversal is recognised in profit or loss. However, any subsequent recovery in the fair
value of an impaired available-for-sale equity security is recognised in OCI.
