Page 80 - ar2012

Notes to the Financial Statements
For the fnancial year ended 31 December 2012
3. Summary of significant accounting policies (cont’d)
3.14 Financial assets (cont’d)
Subsequent measurement (cont’d)
(a) Financial assets at fair value through proft or loss (cont’d)
Subsequent to initial recognition, fnancial assets at fair value through proft or loss are measured at fair value. Any gains
or losses arising from changes in fair value of the fnancial assets are recognised in proft or loss. Net gains or net losses on
fnancial assets at fair value through proft or loss include exchange differences, interest and dividend income.
Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic
characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading
or designated at fair value through proft or loss. These embedded derivatives are measured at fair value with changes in fair
value recognised in the consolidated statement of comprehensive income. Reassessment only occurs if there is a change in
the terms of the contract that signifcantly modifes the cash fows that would otherwise be required.
(b) Loans and receivables
Non-derivative fnancial assets with fxed or determinable payments that are not quoted in an active market are classifed
as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the
effective interest method, less impairment. Gains and losses are recognised in proft or loss when the loans and receivables
are derecognised or impaired, and through the amortisation process.
De-recognition
A fnancial asset is derecognised where the contractual right to receive cash fows from the asset has expired. On de-recognition
of a fnancial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any
cumulative gain or loss that had been recognised in other comprehensive income is recognised in proft or loss.
Regular way purchase or sale of a fnancial asset
All regular way purchases and sales of fnancial assets are recognised or derecognised on the trade date i.e., the date that the
Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of fnancial assets that require
delivery of assets within the period generally established by regulation or convention in the marketplace concerned.
3.15 Derivative fnancial instruments
Future commodity contracts
The Group applies the provisions of FRS 39, “Financial Instruments: Recognition and Measurement”. FRS 39 requires that all of
the following conditions to be met for a hedging relationship to qualify as hedge accounting: (a) at the inception of the hedge there
is formal designation and documentation of the hedging relationship and the Group’s risk management objective and strategy for
undertaking the hedge; (b) the hedge is expected to be highly effective in achieving offsetting changes in fair value or cash fows
attributable to the hedged risk; (c) for cash fow hedges, a forecast transaction that is the subject of the hedge must be highly
probable and must present an exposure to variations in cash fows that could ultimately affect proft or loss; (d) the effectiveness
of the hedge can be reliably measured; and (e) the hedge is assessed on an ongoing basis and determined actually to have been
highly effective throughout the fnancial reporting periods for which the hedge was designated.
The related receivables and payables arising from the above transaction are presented in the consolidated balance sheet as regular
fnancial instruments and are carried at fair values based on the quoted market prices of the related commodity.
78