Annual Report 2012

Financial Statements (PRC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the year ended 31 December 2012
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(8) Intangible assets
Intangible assets, where the estimated useful life is finite, are stated in the balance sheet at cost less accumulated amortisation and provision
for impairment losses (see Note 3(12)). For an intangible asset with finite useful life, its cost less estimated residual value and accumulated
impairment losses is amortised on a straight-line basis over the expected useful lives, unless the intangible assets are classified as held for sale
(see Note 3(10)).
An intangible asset is regarded as having an indefinite useful life and is not amortised when there is no foreseeable limit to the year over which
the asset is expected to generate economic benefits for the Group.
(9) Goodwill
The initial cost of goodwill represents the excess of cost of acquisition over the acquirer’s interest in the fair value of the identifiable net assets
of the acquiree under the business combination involving entities not under common control.
Goodwill is not amortised and is stated at cost less accumulated impairment losses (see Note 3(12)). On disposal of an asset group or a set of
asset groups, any attributable amount of purchased goodwill is written off and included in the calculation of the profit or loss on disposal.
(10) Non-current assets held for sale
A non-current asset is accounted for as held for sale when the Group has made a decision and signed a non-cancellable agreement on the
transfer of the asset with the transferee, and the transfer is expected to be completed within one year. Such non-current assets may include fixed
assets, intangible assets, investment property subsequently measured using the cost model, long-term equity investment, etc., but not include
financial instruments and deferred tax assets. Non-current assets held for sale are stated at the lower of carrying amount and net realisable
value. Any excess of the carrying amount over the net realisable value is recognised as an impairment loss.
(11) Financial Instruments
Financial instruments of the Group include cash and cash equivalents, bond investments, equity securities other than long-term equity
investments, receivables, derivative financial instruments, payables, loans, bonds payable, and share capital, etc.
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(a) Classification, recognition and measurement of financial instruments
The Group recognises a financial asset or a financial liability on its balance sheet when the Group enters into and becomes a party to the
underlining contract of the financial instrument.
The Group classifies financial assets and liabilities into different categories at initial recognition based on the purpose of acquiring assets
and assuming liabilities: financial assets and financial liabilities at fair value through profit or loss, loans and receivables, held-to-maturity
investments, available-for-sale financial assets and other financial liabilities.
Financial assets and financial liabilities are initially recognised at fair value. For financial asset or financial liability of which the change in its
fair value is recognised in profit or loss, the relevant transaction cost is recognised in profit or loss. The transaction costs for other financial
assets or financial liabilities are included in the initially recognised amount. Subsequent to initial recognition financial assets and liabilities
are measured as follows:
– Financial asset or financial liability with change at fair value recognised through profit or loss (including financial asset or financial liability
held for trading)
A financial asset or financial liability is classified as at fair value through profit or loss if it is acquired or incurred principally for the
purpose of selling or repurchasing in the near term or if it is a derivative, unless the derivative is a designated and effective hedging
instrument, or a financial guarantee contract, or a derivative that is linked to and must be settled by delivery of an unquoted equity
instrument (without a quoted price from an active market) whose fair value cannot be reliably measured. These financial instruments
are initially measured at fair value with subsequently changes in fair value recognised in profit or loss. Subsequent to initial recognition,
financial assets and financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognised
in profit or loss.
– Receivables
Receivables are non-derivative financial assets with fixed or determinable recoverable amount and with no quoted price in active market.
After the initial recognition, receivables are measured at amortised cost using the effective interest method.
– Held-to-maturity investment
Held-to-maturity investment includes non-derivative financial assets with fixed or determinable recoverable amount and fixed maturity that
the Group has the positive intention and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity investments are
measured at amortised cost using the effective interest method.
Annual Report 2012 CHINA PETROLEUM & CHEMICAL CORPORATION