Notestothefinancialstatements
For the financial year ended31December 2015
2.
Summaryof significant accountingpolicies (cont’d)
2.10
Impairment of financial assets
TheGroupassessesat each reportingdatewhether there isany objectiveevidence that a financial asset is impaired.
(a)
Financial assetscarriedat amortisedcost
For financial assets carried at amortised cost, theGroup first assesseswhether objective evidence of impairment exists individually for financial assets
that are individually significant, or collectively for financial assets that arenot individually significant. If theGroupdetermines that no objective evidence
of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with
similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and forwhich an
impairment loss is, or continues tobe recognisedarenot included ina collectiveassessment of impairment.
If there isobjectiveevidence that an impairment losson financial assetscarriedat amortisedcost hasbeen incurred, theamount of the loss ismeasured
as 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. If a loanhasa variable interest rate, thediscount rate formeasuringany impairment loss is the current effective interest rate. The
carryingamount of theasset is reduced through theuseof anallowanceaccount. The impairment loss is recognised in theprofit or loss.
When theasset becomesuncollectible, thecarryingamount of impaired financial assets is reduceddirectlyor if anamountwascharged to theallowance
account, theamounts charged to theallowanceaccount arewrittenoff against the carrying valueof the financial asset.
Todeterminewhether there isobjectiveevidence that an impairment losson financial assetshasbeen incurred, theGroup considers factors suchas the
probability of insolvency or significant financial difficultiesof thedebtor anddefault or significant delay inpayments.
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 value of the asset does not exceed its
amortised cost at the reversal date. Theamount of reversal is recognised in theprofit or loss.
(b)
Financial assetscarriedat cost
If there is objective evidence (such as significant adverse changes in the business environment where 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 thedifferencebetween the asset’s carrying amount and thepresent value of estimated future cash flows discounted at the currentmarket
rateof return for a similar financial asset. Such impairment lossesarenot reversed in subsequent periods.
2.
Summaryof significant accountingpolicies (cont’d)
2.10
Impairment of financial assets (cont’d)
(c)
Available-for-sale financial assets
In thecaseof equity investmentsclassifiedasavailable-for-sale, objectiveevidenceof impairment include (i) significant financial difficultyof the issueror
obligor, (ii) informationabout significant changeswithanadverseeffect thathave takenplace in the technological,market, economicor legal environment
inwhich the issuer operates, and indicates that the cost of the investment in equity instrumentmay not be recovered; and (iii) a significant or prolonged
decline in the fair valueof the investmentbelow itscosts. ‘Significant’ is tobeevaluatedagainst theoriginal cost of the investment and ‘prolonged’ against
theperiod inwhich the fair valuehasbeenbelow itsoriginal cost.
If anavailable-for-sale financial asset is impaired, anamount comprising thedifferencebetween its cost (net of any principal payment andamortisation)
and its current fair value, less any impairment loss previously recognised in the profit or loss, is transferred from other comprehensive income and
recognised inprofit or loss. Reversalsof impairment losses in respect of equity instrumentsarenot recognised in theprofit or loss; increase in fair value
after their impairment are recogniseddirectly inother comprehensive income.
In thecaseofdebt instrumentsclassifiedasavailable-for-sale, impairment isassessedbasedon thesamecriteriaas financialassetscarriedatamortised
cost. However, the amount recorded for impairment is the cumulative lossmeasured as the difference between the amortised cost and the current fair
value, less any impairment loss on that investment previously recognised in profit or loss. Future interest income continues to be accrued based on the
reducedcarryingamount of theasset, using the rateof interest used todiscount the futurecash flows for thepurposeofmeasuring the impairment loss.
The interest income is recordedaspart of finance income. If, inasubsequent year, the fair valueof adebt instrument increasesand the increasescanbe
objectively related toanevent occurringafter the impairment losswas recognised inprofit or loss, the impairment loss is reversed inprofit or loss.
2.11
Cashandcashequivalents
Cash and cash equivalents comprise cash onhand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amounts
of cash and which are subject to an insignificant risk of changes in value. These also include bank overdrafts that form an integral part of the Group’s cash
management.
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BAKERTECHNOLOGYlimited
ANNUAL REPORT 2015
