Full annual report - African Bank - Investoreports

Notes to the group annual financial statements continued
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4.10.6.1 Fair value hedges
Where a hedging relationship is designated as a fair value hedge, the hedged item is adjusted for the
change in fair value in respect of the risk being hedged. Gains or losses on the remeasurement of both
the derivative and the hedged item are recognised in profit or loss. Fair value adjustments relating to
the hedging instrument are allocated to the same profit or loss category as the related hedged item.
Any ineffectiveness is also recognised in the same profit or loss category as the related hedged item.
If the derivative expires, is sold, terminated, exercised, no longer meets the criteria for fair value
hedge accounting, or the designation is revoked, hedge accounting is discontinued.
4.10.6.2 Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as
cash flow hedges are recognised in the cash flow hedging reserve in the statement of changes in
equity. The gain or loss relating to any ineffective portion is recognised immediately in profit or loss.
Amounts accumulated in equity are transferred to profit or loss in the periods in which the hedged
item affects profit or loss.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge
accounting, the cumulative gains or losses recognised in equity remain in equity until the forecast
transaction is recognised in the case of a non-financial asset or a non-financial liability, or until the
forecast transaction affects profit or loss in the case of a financial asset or a financial liability. If
the forecast transaction is no longer expected to occur, the cumulative gains or losses that were
recognised in equity are immediately transferred to profit or loss.
4.10.7 Offsetting
Financial assets and liabilities are offset and the net amount reported only when a legally enforceable right to
set off the recognised amount exists and there is an intention either to settle on a net basis, or to realise the
asset and settle the liability simultaneously. Income and expense items are offset only to the extent that their
related instruments have been offset in the statement of financial position.
4.11 Investments
Investments are recognised on a trade-date basis and are initially measured at fair value plus, in the case where
financial instruments are not at fair value through profit or loss, any directly attributable transaction costs.
Debt securities that the group has the express intention and ability to hold to maturity are classified as held-tomaturity
debt securities. At subsequent reporting dates, held-to-maturity securities are measured at amortised cost
using the effective interest rate method less any impairment loss recognised to reflect irrecoverable amounts. The
annual amortisation of any discount or premium on the acquisition of a held-to-maturity security is aggregated with
other investment income receivable over the term of the instrument so that the revenue recognised in each period
represents a constant yield on the investment.
Investments other than held-to-maturity debt securities are classified at fair value through profit or loss or availablefor-sale,
and are measured at subsequent reporting dates at fair value.
4.12 Loans and advances and related impairment provisions
4.12.1 Loans and advances
Loans and advances are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They arise when the group provides money, goods or services directly to a debtor
with no intention to trade the receivable. Loans and advances originated by African Bank (whether in African