The Group KD Group and KD Group dd

The Group KD Group Annual Report 2009
Notes to Consolidated Financial Statements as at and for the year ended 31 December 2009
2.8.4.2. Measurement of financial assets
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value.
Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method.
Gains and losses arising from changes in the fair value of the "financial assets at fair value through profit or loss" category are
included in the income statement in the period in which they arise. Gains and losses arising from changes in the fair value of
available-for-sale financial assets are recognised directly inother comprehensive income, until the financial asset is
derecognised or impaired. At this time, the cumulative gain or loss previously recognised in equity is recognised in profit or
loss. However, interest calculated using the effective interest method and foreign currency gains and losses on monetary
assets classified as available for sale are recognised in the income statement. Dividends on available-for-sale equity
instruments are recognised in the income statement when the entity’s right to receive payment is established.
The fair values of investments listed on active markets are based on current bid prices. If there is no active market for a
financial asset, the Group establishes fair value using valuation techniques. These include the use of recent arm’s length
transactions, discounted cash flow analysis and other valuation techniques commonly used by market participants.
2.9 Impairment of assets
2.9.1 Impairment of financial assets
(a) Financial assets carried at amortised cost
The Group assesses at balance sheet date 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 if, and 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 a 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. Objective evidence that a financial asset or group of assets is
impaired includes observable data that comes to the attention of the Group about the following loss events:
• significant financial difficulty of the issuer;
• a breach of contract, such as a default or delayed payement of interest or principal amount;
• the Group granting to the borrower, for economic or legal reasons relating to the borrower’s financial difficulty, a
concession that the lender would not otherwise consider;
• it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
• the disappearance of an active market for that financial asset because of financial difficulties; or
• observable data indicating that there has been a measurable decrease in the estimated future cash flows from a
group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified
with the individual financial assets in the Group, including:
- adverse changes in the payment status of borrowers in the Group; or
- national or local economic conditions that correlate with defaults on the assets in the Group.
The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually
significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial
asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and
collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment
loss is or continues to be recognised are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at
amortised cost has been incurred, 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 through the use of an
allowance account and the amount of the loss is recognised in the income statement. If a loan or held-to-maturity investment
has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate
determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s
fair value using an observable market price. The calculation of the present value of the estimated future cash flows of a
collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the
collateral, whether or not foreclosure is probable.
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