HTC 2013 Annual Report Download - page 133

FINANCIAL INFORMATION FINANCIAL INFORMATION
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Fair value is determined in the manner described
in Note 32.
Changes in the carrying amount of AFS monetary
financial assets relating to changes in foreign
currency exchange rates (see below), interest
income calculated using the effective interest
method and dividends on AFS equity investments
are recognized in profit or loss. Other changes in
the carrying amount of AFS financial assets are
recognized in other comprehensive income and
accumulated under the heading of investments
revaluation reserve. When the investment is
disposed of or is determined to be impaired,
the cumulative gain or loss that previously
accumulated in the investments revaluation
reserve is reclassified to profit or loss.
Dividends on AFS equity instruments are
recognized in profit or loss when the Company's
right to receive the dividends is established.
AFS equity investments that do not have a listed
market price in an active market and whose fair
value cannot be reliably measured and derivatives
that are linked to and must be settled by delivery
of such unquoted equity investments are
measured at cost less any identified impairment
losses at the end of each reporting period and
are recognized in a separate line item as financial
assets carried at cost. The financial assets are
remeasured at fair value if they can be reliably
measured at fair value in a subsequent period.
The difference between carrying amount and
fair value is recognized in profit or loss or other
comprehensive income on financial assets.
4. Loans and receivables
Loans and receivables are non-derivative financial
assets with fixed or determinable payments that
are not quoted in an active market. Loans and
receivables (including trade receivables, cash and
cash equivalent, other current financial assets,
and other receivable) are measured at amortized
cost using the effective interest method, less
any impairment. Interest income is recognized
by applying the effective interest rate, except
for short-term receivables when the effect of
discounting is immaterial.
b. Impairment of financial assets
Financial assets, other than those at FVTPL, are
assessed for indicators of impairment at the end
of each reporting period. Financial assets are
considered to be impaired when there is objective
evidence that, as a result of one or more events
that occurred after the initial recognition of the
financial asset, the estimated future cash flows of
the investment have been affected.
For certain categories of financial assets, such as
trade receivables and other receivables, assets are
assessed for impairment on a collective basis even if
they were assessed not to be impaired individually.
Objective evidence of impairment for a portfolio
of receivables could include the Company's past
experience of collecting payments, an increase in
the number of delayed payments in the portfolio
past the average credit period, as well as observable
changes in national or local economic conditions
that correlate with default on receivables.
For financial assets carried at amortized cost, the
amount of the impairment loss recognized is 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.
For financial assets measured at amortized cost,
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 recognized, the previously
recognized impairment loss is reversed through
profit or loss to the extent that the carrying amount
of the investment at the date the impairment is
reversed does not exceed what the amortized cost
would have been had the impairment not been
recognized.
For AFS equity investments, a significant or
prolonged decline in the fair value of the security
below its cost is considered to be objective
evidence of impairment.
For all other financial assets, objective evidence of
impairment could include:
‧ Significant financial difficulty of the issuer or
counterparty; or
‧ Breach of contract, such as a default or
delinquency in interest or principal payments; or
‧ It becoming probable that the borrower will
enter bankruptcy or financial re-organization; or
‧ The disappearance of an active market for that
financial asset because of financial difficulties.
When an AFS financial asset is considered to be
impaired, cumulative gains or losses previously
recognized in other comprehensive income are
reclassified to profit or loss in the period.
In respect of AFS equity securities, impairment
losses previously recognized in profit or loss are
not reversed through profit or loss. Any increase
in fair value subsequent to an impairment loss is
recognized in other comprehensive income and
accumulated under the heading of investments
revaluation reserve. In respect of AFS debt
securities, impairment losses are subsequently
reversed through profit or loss if an increase in
the fair value of the investment can be objectively
related to an event occurring after the recognition
of the impairment loss.
For financial assets that are carried at cost, the
amount of the impairment loss is measured as the
difference between the asset's carrying amount and
the present value of the estimated future cash flows
discounted at the current market rate of return for a
similar financial asset. Such impairment loss will not
be reversed in subsequent periods.
The carrying amount of the financial asset is reduced
by the impairment loss directly for all financial
assets with the exception of trade receivables and
other receivables, where the carrying amount is
reduced through the use of an allowance account.
When a trade receivable and other receivables are
considered uncollectible, it is written off against
the allowance account. Subsequent recoveries of
amounts previously written off are credited against
the allowance account. Changes in the carrying
amount of the allowance account are recognized in
profit or loss.
c. Derecognition of financial assets
The Company derecognizes a financial asset only
when the contractual rights to the cash flows from
the asset expire, or when it transfers the financial
asset and substantially all the risks and rewards of
ownership of the asset to another party.
On derecognition of a financial asset in its entirety,
the difference between the asset's carrying amount
and the sum of the consideration received and
receivable and the cumulative gain or loss that had
been recognized in other comprehensive income
and accumulated in equity is recognized in profit or
loss.
Equity instruments
Debt and equity instruments issued by a group entity
are classified as either financial liabilities or as equity
in accordance with the substance of the contractual
arrangements and the definitions of a financial liability
and an equity instrument.
An equity instrument is any contract that evidences
a residual interest in the assets of an entity after
deducting all of its liabilities. Equity instruments issued
by a group entity are recognized at the proceeds
received, net of direct issue costs.
Repurchase of the Company's own equity instruments
is recognized and deducted directly in equity. No gain
or loss is recognized in profit or