HTC 2015 Annual Report Download - page 127

Financial information
Financial information
250
251
to the acquisition or issue of financial assets and financial
liabilities (other than financial assets and financial liabilities
at fair value through profit or loss) are added to or deducted
from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are
recognized immediately in profit or loss.
Financial assets
All regular way purchases or sales of financial assets are
recognized and derecognized on a trade date basis.
a. Measurement category
Financial assets are classified into the following
categories: Financial assets at fair value through profit
or loss, available-for-sale financial assets, and loans and
receivables.
1. Financial assets at fair value through profit or loss
(FVTPL)
Financial assets are classified as at fair value through
profit or loss when the financial asset is either held
for trading or it is designated as at fair value through
profit or loss.
A financial asset may be designated as at fair value
through profit or loss upon initial recognition if:
• Such designation eliminates or significantly
reduces a measurement or recognition
inconsistency that would otherwise arise; or
• The financial asset forms part of a group of financial
assets or financial liabilities or both, which is
managed and its performance is evaluated on a
fair value basis, in accordance with the Company's
documented risk management or investment
strategy, and information about the grouping is
provided internally on that basis; or
• The contract contains one or more embedded
derivatives so that the entire hybrid (combined)
contract can be designated as at fair value through
profit or loss.
Financial assets at FVTPL are stated at fair value,
with any gains or losses arising on remeasurement
recognized in profit or loss. The net gain or loss
recognized in profit or loss incorporates any dividend
or interest earned on the financial asset and is
included in the other gains and losses' line item.
Fair value is determined in the manner described in
Note 31.
Investments in equity instruments under financial
assets at FVTPL 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 instruments are subsequently measured at cost
less any identified impairment loss 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 the carrying amount and the
fair value is recognized in profit or loss.
2. Available-for-sales (AFS) financial assets
AFS financial assets are non-derivatives that are
either designated as AFS or are not classified as
(i) loans and receivables, (ii) held-to-maturity
investments or (iii) financial assets at FVTPL.
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.
Available-for-sale equity investments that do not have
a quoted 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 loss at the end of
each reporting period and are presented in a separate
line item as financial assets carried at cost. If, in a
subsequent period, the fair value of the financial
assets can be reliably measured, the financial assets
are remeasured at fair value. The difference between
carrying amount and fair value is recognized in other
comprehensive income on financial assets. Any
impairment losses are recognized in profit and loss.
3. Loans and receivables
Loans and receivables (including trade receivables,
cash and cash equivalent, debt investments with
no active market, other current financial assets,
and other receivables) are measured at amortized
cost using the effective interest method, less any
impairment, except for short-term receivables when
the effect of discounting is immaterial.
Cash equivalent includes time deposits with original
maturities within three months from the date
of acquisition, highly liquid, readily convertible
to a known amount of cash and be subject to an
insignificant risk of changes in value. These cash
equivalents are held for the purpose of meeting short-
term cash commitments.
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 financial assets carried at amortized cost, 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 of 60 days,
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 include significant financial difficulty of
the issuer or counterparty, breach of contract, such
as a default or delinquency in interest or principal
payments, it becoming probable that the borrower will
enter bankruptcy or financial re-organization and 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