Notes To The Financial Statements
(Continued) For The Year Ended 30 Jun 2014
2.5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e) Financial assets
Initial Recognition
The organisation determines the classification of its financial assets at initial recognition. Financial assets are
recognised initially at fair value plus, in the case of investments not at fair value through profit and loss, directly
attributable transaction costs. The organisation’s financial assets include cash, trade and other receivables.
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as follows:
Receivables
Receivables are non-derivatives financial assets with fixed or determinable payments that are not quoted in an
active market. Such financial assets are carried at cost.
Impairment of financial assets
The organisation assesses at each balance sheet date whether there is any objective evidence that a financial
asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be
impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has
occurred after initial recognition of the asset (an incurred ‘loss event’) and that the loss event has an impact on
the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors are experiencing
significant financial difficulty, default or delinquency in interest or principal payments, the probability that they
will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a
measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions
that correlate with defaults.
Derecognition of financial asset
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is
derecognized when the rights to receive cash flows from the asset have expired.
f) Financial liabilities
Initial recognition
The organisation determines the classification of its financial liabilities at initial recognition. Financial liabilities
are recognised initially at fair value and in the case of loans and borrowings, plus directly attributable
transaction costs. The organisation’s financial liabilities include trade and other payables.
Subsequent measurement
The subsequent measurement of financial liabilities depends on their classification as follows:
Loans and Borrowings
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost
using the effective interest rate method. Gains and losses are recognised in the income statement when the
liabilities are derecognized as well as through the effective interest rate method (EIR) amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fee or costs
that are an integral part of the EIR. The EIR amortization is included in finance cost recognised through the
statement of profit or loss.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms,
or the terms of an existing liability are substantially modified, such an exchange or modification is treated as
derecognition of the original liability and the recognition of a new liability, and the difference in the respect
carrying amounts is recognised through the statement of profit or loss.
46
Select target paragraph3
Add to table of contents