46
McPHERSON’S LIMITED
ANNUAL REPORT 2015
NOTE 1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
(M) NON-CURRENT ASSETS (OR DISPOSAL
GROUPS) HELD FOR SALE AND DISCONTINUED
OPERATIONS (CONTINUED)
An impairment loss is recognised for any initial or subsequent write
down of the asset (or disposal group) to fair value less costs to sell. A
gain is recognised for any subsequent increases in fair value less costs
to sell of an asset (or disposal group), but not in excess of any
cumulative impairment loss previously recognised. A gain or loss not
previously recognised by the date of the sale of the noncurrent asset
(or disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are
not depreciated or amortised while they are classified as held for sale.
Non-current assets classified as held for sale and the assets of a
disposal group classified as held for sale are presented separately from
the other assets in the balance sheet. The liabilities of a disposal
group classified as held for sale are presented separately from other
liabilities in the balance sheet.
A discontinued operation is a component of the entity that has been
disposed of or is classified as held for sale and that represents a
separate cash-generating unit or a group of cash-generating units and
is a separate major line of business or geographical area of operations
and is part of a single co-ordinated plan to dispose of such a line of
business or area of operations. The results of discontinued operations
are presented separately in the statement of comprehensive income.
(N) INVESTMENTS AND OTHER FINANCIAL
ASSETS
The Group classifies its financial assets in the following categories:
•financial assets at fair value through profit or loss; and
•loans and receivables.
The classification depends on the purpose for which the investments
were acquired. Management determines the classification of its
investments at initial recognition. At initial recognition, the Group
measures these financial assets at fair value.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets
held for trading which are acquired principally for the purpose of
selling in the short-term with the intention of making a profit.
Derivatives are also categorised as held for trading unless they are
designated as hedges which qualify for hedge accounting.
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 those with maturities greater
than 12 months after the balance sheet date which are classified as
noncurrent assets. Loans and receivables are included in receivables
in the balance sheet.
Impairment
The Group assesses at the end of each reporting period whether there is
objective evidence that a financial asset or 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.
For loans and receivables, the amount of the loss is measured as the
difference between the asset’s carrying amount and the present value
of estimated future cash flows (excluding future credit losses that have
not been incurred) discounted at the financial asset’s original effective
interest rate. The carrying amount of the asset is reduced and the
amount of the loss is recognised in profit or loss.
(O) DERIVATIVES AND HEDGING ACTIVITIES
Derivatives are initially recognised at fair value on the date a derivative
contract is entered into and are subsequently remeasured to their fair
value at the end of each reporting period. The accounting for
subsequent changes in fair value depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the item
being hedged. The Group designates its derivatives as hedges of
highly probable forecast transactions (cash flow hedges).
The Group documents at the inception of the transaction the
relationship between hedging instruments and hedged items, as well
as its risk management objective and strategy for undertaking various
hedge transactions. The Group also documents its assessment, both
at hedge inception and on an ongoing basis, of whether the
derivatives that are used in hedging transactions have been and will
continue to be highly effective in offsetting changes in cash flows of
hedged items.
Cash flow hedges that qualify for hedge
accounting
The effective portion of changes in the fair value of derivatives that are
designated and qualify as cash flow hedges is recognised in other
comprehensive income and in the hedging reserve within equity. The
gain or loss relating to the ineffective portion is recognised
immediately in profit or loss.
Amounts accumulated in equity are reclassified to profit or loss in the
periods when the hedged item affects profit or loss. The gain or loss
relating to the effective portion of interest rate swaps hedging variable
rate borrowings is recognised in profit or loss within ‘finance costs’.
However, when the forecast transaction that is hedged results in the
recognition of a non-financial asset (for example, inventory) the gains
and losses previously deferred in equity are reclassified from equity
and included in the initial measurement of the cost of the asset. The
deferred amounts are ultimately recognised in profit or loss as cost of
goods sold in the case of inventory.
When foreign currency options are used to hedge forecast future
inventory purchases, the Group only designates the intrinsic value of
the option as the hedging instrument. The intrinsic value of the option
is accounted for in accordance with the previous paragraph. The time
value of the option is recognised within other comprehensive income
and in the hedging reserve within equity. The time value of the option
is subsequently included within the initial cost of the related inventory.
The deferred amounts are ultimately recognised in profit or loss as
cost of goods sold.
When a hedging instrument expires or is sold or terminated, or when a
hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss existing in equity at that time remains in equity
and is recognised when the forecast transaction is ultimately
recognised in profit or loss. When a forecast transaction is no longer
expected to occur, the cumulative gain or loss that was reported in
equity is immediately transferred to profit or loss.
Derivatives that do not qualify for hedge
accounting
Changes in the fair value of any derivative instrument that does not
qualify for hedge accounting are recognised immediately in profit or
loss and are included in other income, other expenses or finance costs.
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS CONTINUED