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
For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk
characteristics (using the valuation model of the Group, which takes into account the type of assets, industry, geographical
location, type of investment, maturity and other relevant characteristics).
Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the
debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated.
Future cash flows in a group of financial assets that are collectively assessed for impairment are estimated on the basis of the
contractual cash flows of the assets in the Group and historical loss experience, namely on the basis of similar credit risk
exposure in the past. Historical loss experience is restated on the basis of current observable data to reflect the effects of
current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of
conditions in the historical period that do not exist currently.
Estimates of changes in future cash flows for groups of assets should reflect and be directly consistent with changes in
related observable data from period to period (for example, changes in unemployment rates, property prices, payment status,
or other factors indicative of changes in the probability of losses in the group and directly consistent with their magnitude). The
methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group to reduce any
differences between loss estimates and the actual loss .
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the previously
recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in the
income statement.
When an asset is uncollectible, it is written off against the allowance account for the asset. Such assets are written off after all
the necessary procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of
amounts previously written off decrease the amount of the impairment charge in the income statement.
(b) Financial assets classified as available for sale
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of
financial assets is impaired. In the case of equity investments classified as available for sale, a significant or prolonged
decline in the fair value below their cost, a maximum period of 9 months from the date when the fair value of equity
instruments first fell below the purchase price and has remained below the total period of 9 months is taken into account,
while in determination of a significant decrease in the assessment of fair value, the management takes into account at least
40% reduction in the fair value.
If any such evidence exists, the cumulative loss – measured as the difference between the acquisition cost and the current
fair value, less any impairment loss on the financial asset previously recognised in profit or loss – is removed from equity and
recognised in the income statement. If, in a subsequent period, the fair value of a debt instrument classified as available for
sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in
profit or loss, the impairment loss is reversed through the income statement.
2.9.2 Impairment of non-financial assets
Intangible assets which are not subject to amortisation are tested annually for impairment. Assets that are subject to
amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is determined for an individual asset, unless the asset does not generate cash
inflows that are largely independent of those from other assets or groups of assets. In such case, the recoverable amount is
established for a cash-generating unit i.e. the smallest identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets. The criterion for determining the cash-generating units
is the individual business area of the Group. The recoverable amount of an asset or a cash-generating unit is the higher of its
fair value less costs to sell and its value in use.
2.10 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average cost
method. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling
expenses.
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