NewWorld Development Company Limited
FINANCIAL SECTION
120
3 PRINCIPAL ACCOUNTING POLICIES
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(h) Investments
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Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial
position when there is a legally enforceable right to offset the recognised amounts and there is an intention to
settle on a net basis or realise the asset and settle the liability simultaneously.
The fair values of listed investments are based on quoted bid prices at the end of the reporting period. If the
market for a financial asset is not active and for unlisted financial assets, the Group establishes fair value by
using valuation techniques. These include the use of recent arm’s length transactions, reference to other
instruments that are substantially the same, discounted cash flow analysis and option pricing models, making
maximum use of market inputs and relying as little as possible on entity-specific inputs.
(i) Derivative financial instruments
A derivative is initially recognised at fair value on the date a derivative contract is entered into and is
subsequently remeasured at its fair value at the end of each reporting period. The change in the fair value is
recognised in the consolidated income statement.
(j) Impairment of financial assets
(i) Assets carried at amortised cost
The Group assesses at the end of each reporting period whether there is objective evidence that a
financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is
impaired and impairment losses are incurred only if there is objective evidence of impairment as a result
of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that
loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of
financial assets that can be reliably estimated.
The criteria that the Group uses to determine that there is objective evidence of an impairment loss
include:
•
Significant financial difficulty of the issuer or obligor;
•
A breach of contract, such as a default or delinquency in interest or principal payments;
•
The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to
the borrower a concession that the lender would not otherwise consider;
•
It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
•
The disappearance of an active market for that financial asset because of financial difficulties; or
•
Observable data indicating that there is a measurable decrease in the estimated future cash flows
from a portfolio of financial assets since the initial recognition of those assets, although the decrease
cannot yet be identified with the individual financial assets in the portfolio, including:
(1) adverse changes in the payment status of borrowers in the portfolio;
(2) national or local economic conditions that correlate with defaults on the assets in the portfolio.
