61
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2014
2.
Summary of significant accounting policies (cont’d)
2.13
Impairment of financial assets
The Group assesses at each reporting date whether there is any objective evidence that a financial asset or group of financial
assets is impaired.
(a)
Financial assets carried at amortised cost
For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists
individually for financial assets that are individually significant, or collectively for financial assets that are not individually
significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial
asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics
and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an
impairment loss is, or continues to be recognised are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred,
the amount of the 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. If a loan has a variable
interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The carrying
amount of the asset is reduced through the use of an allowance account. The impairment loss is recognised in the
profit or loss.
When the asset becomes uncollectible, the carrying amount of impaired financial assets is reduced directly or if an
amount was charged to the allowance account, the amounts charged to the allowance account are written off against
the carrying value of the financial asset.
To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the
Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default
or significant delay in payments.
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 the profit or loss.
(b)
Financial assets carried at cost
If there is objective evidence (such as significant adverse changes in the business environment where the issuer
operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial
assets carried at cost had been incurred, the amount of the loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows discounted at the current market rate of return
for a similar financial asset. Such impairment losses are not reversed in subsequent periods.
(c)
Available-for-sale financial assets
In the case of equity investments classified as available-for-sale, objective evidence of impairment include (i) significant
financial difficulty of the issuer or obligor, (ii) information about significant changes with an adverse effect that have taken
place in the technological, market, economic or legal environment in which the issuer operates, and indicates that the
cost of the investment in equity instrument may not be recovered; and (iii) a significant or prolonged decline in the fair
value of the investment below its costs. “Significant” is to be evaluated against the original cost of the investment and
“prolonged” against the period in which the fair value has been below its original cost.
