Lenovo 2014 Annual Report Download - page 140

138 Lenovo Group Limited 2013/14 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
2 Significant accounting policies (continued)
(i) Financial assets (continued)
Classification (continued)
(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 designated as hedges (Note 2(k)). 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 which 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(n) and 2(o)).
(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 mature or management intends to dispose of
them within 12 months of the balance sheet date.
Recognition and measurement
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. Financial assets not carried at fair value through profit or loss are initially recognized
at fair value plus transaction costs. 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 as other
comprehensive income/expense.
When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments previously
recognized as other comprehensive income/expense are reclassified to the income statement as gains or losses from
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.
Offsetting financial instruments
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.
(j) Impairment of financial assets
(i) Assets carried at amortized cost
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group
of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are
incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the
initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future
cash flows of the financial asset or group of financial assets that can be reliably estimated.