Huawei 2015 Annual Report Download - page 62

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generally not met until late in the development
stage of the project when the remaining
development costs are immaterial. Therefore
most expenditure on research and development
activities is recognised as an expense in the
period in which it is incurred.
(j) Leased assets
An arrangement is a lease if the substance of
the arrangement conveys a right to use a specific
asset or assets for an agreed period of time in
return for a payment or a series of payments
whether the arrangement takes the legal form
of a lease or not.
(i) Classification of assets leased to the Group
Leases which do not transfer substantially all the
risks and rewards of ownership to the Group are
classified as operating leases.
(ii) Operating lease charges
Where the Group has the use of assets held
under operating leases, payments made under
the leases are charged to profit or loss in equal
instalments over the accounting periods covered
by the lease term, except where an alternative
basis is more representative of the pattern of
benefits to be derived from the leased asset.
Lease incentives received are recognised in profit
or loss as an integral part of the aggregate net
lease payments made. Contingent rentals are
charged to profit or loss in the accounting period
in which they are incurred.
(k) Impairment of assets
(i) Impairment of financial assets
Loans and receivables and available-for-sale
debt securities are reviewed at the end of each
reporting period to determine whether there
is objective evidence of impairment. Objective
evidence of impairment includes observable data
that comes to the attention of the Group about
one or more of the following loss events:
■ significant financial difficulty of the debtor;
■ a breach of contract, such as a default or
delinquency in interest or principal payments;
■ it becoming probable that the debtor
will enter bankruptcy or other financial
reorganisation;
■ significant changes in the technological,
market, economic or legal environment that
have an adverse effect on the debtor;
■ a general decline in the ability of a group of
financial assets to make payments when due;
and
■ a significant or prolonged decline in the
fair value of an investment in an equity
instrument below its cost.
Assets are tested for impairment individually and
collectively. Where there is objective evidence
that a financial asset or a group of financial
assets is impaired the Group recognises an
impairment loss using an allowance account
representing the difference between the carrying
amount and the present value of estimated
future cash flows, discounted at the financial
assets' original effective interest rate. When
assets are assessed collectively, they are grouped
on the basis of similar credit characteristics.
Impairment losses are subsequently reversed
if in a subsequent period the amount of an
impairment loss decreases and the decrease can
be linked objectively to an event occurring after
the impairment loss was recognised.
Where an available-for-sale debt security is
deemed to be impaired, cumulative fair value
losses recognised in the available-for-sale reserve
are reclassified to profit or loss. Losses are
reversed if a subsequent increase in fair value
can be objectively related to an event occurring
after the impairment loss was recognised.
Available-for-sale equity securities are impaired
where there has been a significant or prolonged
decline in their fair value below cost and the
cumulative loss is reclassified to profit or loss.
Impairment losses are not reversed.