New World Development Company Limited
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Financial Section
3 Principal Accounting Policies
(continued)
(h) Investments
The Group classifies its investments in the categories of financial assets at fair value through profit or loss, loans and
receivables, held-to-maturity investments, and available-for-sale financial assets. Management determines the
classification of its investments at initial recognition depending on the purpose for which the investments are
acquired.
(i)
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading and those designated as
at fair value through profit or loss at inception under certain circumstances. A financial asset is classified in this
category if acquired principally for the purpose of selling in the short-term or if so designated by management.
Assets in the category are classified as current assets are expected to be settled within 12 months; otherwise,
they are classified as non-current.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor
with no intention of trading the receivable and are included in current assets, except for those with maturities
more than 12 months after the end of the reporting period, which are classified as non-current assets.
(iii) Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed
maturities that management has the positive intention and ability to hold to maturity. Held-to-maturity financial
assets are included in non-current assets, except for those with maturities less than 12 months from the end of
the reporting period, which are classified as current assets.
(iv) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not
classified in any of the other categories. They are included in non-current assets unless management intends to
dispose of or expects to realise the investment within 12 months of the end of the reporting period.
Regular way purchases and sales of financial assets are recognised on trade-date, which is the date on which the
Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs
for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through
profit or loss are initially recognised at fair value and transaction cost are expensed in the consolidated income
statement. Financial assets are derecognised when the rights to receive cash flows from the investments have
expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at
fair value. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective
interest method.
Gains and losses arising from changes in the fair value of the financial assets at fair value through profit or loss are
included in the consolidated income statement in the financial period in which they arise. Changes in the fair value of
available-for-sale financial assets are recognised in other comprehensive income. When available-for-sale financial
assets are sold, the accumulated fair value adjustments are included in the consolidated income statement as gains
or losses from financial assets. Changes in the fair value of monetary financial assets denominated in a foreign
currency and classified as available-for-sale are analysed between translation differences resulting from changes in
amortised cost of the financial asset and other changes in the carrying amount of the financial asset. The translation
differences on monetary financial assets are recognised in the consolidated income statement; translation differences
on non-monetary financial assets are recognised in other comprehensive income.
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.
