2008 Annual Report - Kenford Group Holdings Limited

Notes to the Financial Statements
For the year ended 31 March 2008
4. PRINCIPAL ACCOUNTING POLICIES (Continued)
(g)
Financial instruments (Continued)
(iii)
Financial liabilities (Continued)
Financial liabilities may be designated upon initial recognition as at fair value through profi t or loss if the
following criteria are met: (i) the designation eliminates or signifi cantly reduces the inconsistent treatment
that would otherwise arise from measuring the liabilities or recognising gains or losses on them on a different
basis; (ii) the liabilities are part of a group of fi nancial liabilities which are managed and their performance
evaluated on a fair value basis, in accordance with a documented risk management strategy; or (iii) the
fi nancial liability contains an embedded derivative that would need to be separately recorded.
Other fi nancial liabilities include the following items:
• Trade payables and other short-term monetary liabilities, which are recognised at amortised cost.
• Bank borrowings are initially recognised at the amount advanced net of any transaction costs directly
attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured
at amortised cost using the effective interest method, which ensures that any interest expense over
the period to repayment is at a constant rate on the balance of the liability carried in the balance
sheet. “Interest expense” in this context includes initial transaction costs and premium payable on
redemption, as well as any interest or coupon payable while the liability is outstanding.
(iv)
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
(v)
Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse
the holder for a loss it incurs because a specifi ed debtor fails to make payment when due in accordance
with the original or modifi ed terms of a debt instrument. A fi nancial guarantee contract issued by the Group
and not designated as at fair value through profit or loss is recognised initially at its fair value less transaction
costs that are directly attributable to the issue of the fi nancial guarantee contract. Subsequent to initial
recognition, the Group measures the financial guarantee contact at the higher of: (i) the amount determined
in accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent Assets; and (ii) the amount
initially recognised less, when appropriate, cumulative amortisation recognised in accordance with HKAS 18
Revenue.
(vi)
Derecognition
The Group derecognises a fi nancial asset where the contractual rights to the future cash fl ows in relation to
the investment expire or where the financial asset has been transferred and the transfer meets the criteria for
derecognition in accordance with HKAS 39.
Financial liabilities are derecognised when the objection specifi ed in the relevant contract is discharged,
cancelled or expires.
48 KENFORD GROUP HOLDINGS LIMITED