Annual Report 2012 - ecoWise Holdings Limited

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76ecoWise Holdings Limitedannual report 201231 OCTOBER 2012NOTES TO THE FINANCIAL STATEMENTS2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Non-Derivative Financial Assets (Continued)Financial Assets at Fair Value through Profit or LossA financial asset is classified at fair value through profit or loss if it is classified as held for trading or isdesignated as such upon initial recognition. Financial assets are designated at fair value through profit orloss if the Group manages such investments and makes purchase and sale decisions based on their fairvalue in accordance with the Group’s investment strategy.Attributable transaction costs are recognised in the profit or loss as incurred. Financial assets at fair valuethrough profit or loss are measured at fair value, and changes therein are recognised in the profit or loss.Financial assets designated at fair value through profit or loss comprise equity shares that otherwise wouldhave been classified as available-for-sale.Loans and ReceivablesLoans and receivables comprise trade and other receivables, cash and cash equivalents and finance leasereceivables.Loans and receivables are financial assets with fixed or determinable payments that are not quoted in anactive market. Such assets are recognised initially at fair value plus any directly attributable transaction costs.Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effectiveinterest method less any impairment losses.Cash and cash equivalents comprise cash balances and bank deposits. For the purpose of the consolidatedstatement of cash flows, cash and cash equivalents exclude short-term deposits which are pledged to thebank as security and cannot be withdrawn on demand. Bank overdrafts that are repayable on demand andform an integral part of the Group’s cash management are included as a component of cash and cashequivalents.Available-For-Sale Financial AssetsThe Group’s investments in certain equity shares are classified as available-for-sale financial assets.Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairmentlosses, and foreign exchange gains and losses on available-for-sale monetary items, are recognised directlyin other comprehensive income. When an investment is derecognised, the cumulative gain or loss in othercomprehensive income and presented within equity in other reserves is transferred to the profit or loss.
ecoWise Holdings Limitedannual report 20127731 OCTOBER 2012NOTES TO THE FINANCIAL STATEMENTS2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Non-Derivative Financial LiabilitiesThe Group’s non-derivative financial liabilities comprise trade and other payables and loans and borrowings.Financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initiallyon the trade date at which the Group becomes a party to the contractual provisions of the instrument.Financial liabilities are recognised initially at fair value plus any directly attributable transaction costs.Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effectiveinterest method.Financial assets and liabilities are offset and the net amount presented in the statement of financial positionwhen, and only when, the Group has a legal right to offset the amounts and intends either to settle on a netbasis or to realise the asset and settle the liability simultaneously.Derivative Financial Instruments and Hedge AccountingDerivatives are recognised initially at fair value and the attributable transaction costs are recognised in theprofit or loss as incurred. Subsequent to initial recognition, derivatives are measured and carried at fair value,and changes therein are accounted for as described below.Embedded derivatives are separated from the host contract and accounted for separately if the economiccharacteristics and risks of the host contract and the embedded derivative are not closely related, a separateinstrument with the same terms as the embedded derivative would meet the definition of a derivative, andthe combined instrument is not measured at fair value through the profit or loss.On initial designation of the derivative as the hedging instrument, the Group formally documents therelationship between the hedging instrument and hedged item, including the risk management objectivesand strategy in undertaking the hedge transaction and the hedged risk, together with the methods that willbe used to assess the effectiveness of the hedging relationship.The Group makes an assessment, both at the inception of the hedge relationship as well as on an on-goingbasis, of whether the hedging instruments are expected to be “highly effective” in offsetting the changes inthe fair value or cash flows of the respective hedged items attributable to the hedged risk, and whether theactual effectiveness of each hedge are within an acceptable range. Transaction that is highly probable tooccur and addresses an exposure to variations in cash flows that could ultimately affect reported profit orloss is accounted for as a cash flow hedge of a forecast transaction.
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