BAKERTECHNOLOGYLIMITED
ANNUALREPORT2013
93
Notes to the
Financial Statements
for the financial year ended 31December 2013
2.
Summaryof significantaccounting policies (cont’d)
2.11
Impairment of financial assets
TheGroup assesses at each reporting datewhether there is any objective evidence that a financial asset is impaired.
(a)
Financial assets carried at amortised cost
For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists
individually for financial assets that are individually significant, or collectively for financial assets that are not individually
significant. If theGroupdetermines that noobjective evidenceof impairment exists for an individually assessedfinancial
asset, whether significant or not, it includes the asset in a groupof financial assetswith similar credit risk characteristics
and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an
impairment loss is, or continues to be recognised are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss onfinancial assets carried at amortised cost has been incurred, the
amount of the loss ismeasuredas thedifferencebetween theasset’s carryingamount and thepresent valueof estimated
future cash flows discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate,
the discount rate for measuring any impairment loss is the current effective interest rate. The carrying amount of the
asset is reduced through the use of an allowance account. The amount of the loss is recognised in the profit or loss.
When the asset becomes uncollectible, the carrying amount of impaired financial assets is reduced directly or if an
amount was charged to the allowance account, the amounts charged to the allowance account arewritten off against
the carrying value of the financial asset.
To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the
Group considers factors such as theprobability of insolvency or significant financial difficulties of thedebtor anddefault
or significant delay in payments.
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 recognised, the previously recognised impairment loss is reversed to the
extent that the carrying valueof theasset does not exceed its amortised cost at the reversal date. Theamount of reversal
is recognised in the profit or loss.
(b)
Financial assets carried at cost
If there is objectiveevidence (suchas significant adverse changes in thebusiness environmentwhere the issuer operates,
probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on a financial asset
carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying
amount and thepresent valueof estimated future cashflowsdiscountedat the currentmarket rateof return for a similar
financial asset. Such impairment losses are not reversed in subsequent periods.
(c)
Available-for-salefinancial assets
In the case of equity investments classified as available-for-sale, objective evidence of impairment include (i) significant
financial difficulty of the issuer or obligor, (ii) information about significant changes with an adverse effect that have
takenplace in the technological,market, economicor legal environment inwhich the issuer operates, and indicates that
the cost of the investment in equity instrument may not be recovered; and (iii) a significant or prolonged decline in the
fair value of the investment below its costs. ‘Significant’ is to be evaluated against the original cost of the investment
and ‘prolonged’ against the period inwhich the fair value has been below its original cost.
