Strength & Stability - ECS Holdings Limited

2 Summary of Significant Accounting Policies (Cont’D)
2.6 Financial Instruments (Cont’d)
Non-derivative financial instruments (Cont’d)
Cash and cash equivalents comprise cash balances and bank deposits. Bank overdrafts that are repayable on demand and that form
an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the
statement of cash flows.
Available-for-sale financial assets
The Group’s investments in 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 for impairment losses and foreign exchange gains and losses on availablefor-sale
monetary items (see note 2.3), are recognised directly in equity. When an investment is derecognised, the cumulative gain or
loss in equity is transferred to the income statement.
Equity securities available-for-sale which do not have a quoted market price in an active market and whose fair value cannot be
reliably measured are stated at cost less impairment losses which, in the opinion of the directors, are other than temporary.
Others
Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment
losses.
Derivative financial instruments and hedging activities
The Group holds derivative financial instruments to hedge its foreign currency and interest rate 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 derivates 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.
Derivative financial instruments are recognised initially at fair value; attributable transaction costs are recognised in the income
statement when incurred. Subsequent to initial recognition, derivative financial instruments are measured at fair value. The gain or
loss on remeasurement to fair value is recognised immediately in the income statement. However, where derivatives qualify for hedge
accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged as described below.
The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the balance
sheet date, taking into account current interest rates and the current credit-worthiness of the swap counterparties. The fair value of
forward exchange contracts is their quoted market price at the balance sheet date, being the present value of the quoted forward price.
Notes to the
Financial Statements
These notes form an integral part of the financial statements.
Annual Report 2008
p.
57