Lenovo 2011 Annual Report Download - page 82

2010/11 Annual Report Lenovo Group Limited 85
2 Significant accounting policies (continued)
(g) Impairment of non-financial assets
Assets that have an indefinite useful life or are not yet available for use are not subject to depreciation or amortization
and are tested annually for impairment. Assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the
amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at
the lowest level for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other
than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
(h) Financial assets
The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and
receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were
acquired. Management determines the classification of its financial assets at initial recognition.
(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 at fair
value through profit or loss at inception. 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. Derivatives are also categorized as held
for trading unless they are effective hedging instruments (Note 2(j)). Assets in this category are classified as current
assets if 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 are included in current assets, except for maturities greater than 12 months after the
balance sheet date. These are classified as non-current assets. Loans and receivables comprise trade, notes and
other receivables, deposits, bank deposits and cash and cash equivalents in the balance sheet (Note 2(l) and
2(m)).
(iii) 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 the investment matures or management
intends to dispose of it within 12 months of the balance sheet date.
Regular way purchases and sales of financial assets are recognized on the trade-date, the date on which the Group
commits to purchase or sell the asset. Investments are initially recognized 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 recognized at fair value, and transaction costs are expensed in the income statement. Financial assets are
derecognized 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 are subsequently
carried at amortized 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’
category are presented in the income statement in the period in which they arise. Dividend income from financial assets
at fair value through profit or loss is recognized in the income statement as part of other income when the Group’s right
to receive payments is established.
Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognized in other
comprehensive income.
When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments previously
recognized in other comprehensive income are included in the income statement as gains or losses from investment
securities.
Interest on available-for-sale securities calculated using the effective interest method is recognized in the income
statement as part of other income. Dividends on available-for-sale equity instruments are recognized in the income
statement as part of other income when the Group’s right to receive payments is established.
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally
enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset
and settle the liability simultaneously.