Annual - Aramex

Notes (Continued)
3- Significant accounting policies (Continued)
Financial instruments
Annual
Report 2008
Non-derivative financial instruments
Non-derivative financial instruments comprise available for sale investments, trade receivables, other receivables, cash in hand and at bank,
trade payables, current and non-current liabilities and loans and borrowings from banks.
Non-derivative financial instruments are recognized initially at fair value plus for instruments not at fair value through profit or loss any directly
attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below.
A financial instrument is recognized if the Group becomes a party to the contractual provisions of the instrument. Financial assets are
derecognized if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset
to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases and sales of financial
assets are accounted for at trade date, i.e., the date that the Group commits itself to purchase or sell the asset. Financial liabilities are
derecognized if the Group’s obligations specified in the contract expire or are discharged or cancelled.
Available for sale financial assets
The Group’s investments in certain equity securities are classified as available for sale financial assets. Subsequent to initial recognition,
they are measured at fair value and changes therein, other than impairment losses and foreign exchange gains and losses on available
for sale monetary items, are recognised directly in equity. When an investment is derecognized, the cumulative gain or loss in equity is
transferred to the income statement.
Other
Other non derivative financial assets are measured at amortized cost using the effective interest method less any impairment losses.
Derivative financial instruments
The Group holds derivative financial instruments to hedge its foreign currency risk exposures. Embedded derivatives are separated from the
host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are
not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and
the combined instrument is not measured at fair value through profit or loss.
Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to
initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.
Economic hedges
Hedge accounting is not applied to derivative instruments that economically hedge monetary assets and liabilities denominated in
foreign currencies. Changes in the fair value of such derivatives are recognised in the income statement as part of foreign currency gains
and losses.
Impairment
Financial assets
A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the
estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount,
and the present value of the estimated future cash flows discounted at the original effective interest rate. Individually significant financial
assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar
credit risk characteristics. All impairment losses are recognized in the income statement. An impairment loss is reversed if the reversal can
be related objectively to an event occurring after the impairment loss was recognized.
Non-financial assets
The carrying amounts of the Group’s non-financial assets, are reviewed at each reporting date to determine whether there is any indication
of impairment. If any such indication exists then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have
indefinite useful lives or that are not yet available for use, recoverable amount is estimated at each reporting date. An impairment loss is
recognized if the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognized
in the income statement.
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