Annual Report 2012 - ecoWise Holdings Limited

78ecoWise Holdings Limitedannual report 201231 OCTOBER 2012NOTES TO THE FINANCIAL STATEMENTS2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Derivative Financial Instruments and Hedge Accounting (Continued)Cash Flow HedgesWhen a derivative is designated as the hedging instrument in a hedge of the variability in cash flowsattributable to a particular risk associated with a recognised asset or liability or a highly probable forecasttransaction that could affect the profit or loss, the effective portion of changes in the fair value of the derivativeis recognised (net of tax) in other comprehensive income and presented in the hedging reserve in equity. Anyineffective portion of changes in the fair value of the derivative is recognised immediately in the profit or loss.Other Non-Trading DerivativesWhen a derivative financial instrument is not designated in a hedge relationship that qualifies for hedgeaccounting, all changes in its fair value are recognised immediately in the profit or loss.Financial Guarantee ContractsFinancial guarantee contracts are initially recognised at fair value and are subsequently measured at thegreater of (a) the amount determined in accordance with FRS 37 and (b) the amount initially recognised less,where appropriate, cumulative amortisation recognised in accordance with FRS 18. All changes in fair valuerelating to liabilities at fair value through profit or loss are recognised to profit or loss as incurred.Fair Value of Financial InstrumentsThe carrying values of current financial instruments approximate their fair values due to the short-termmaturity of these instruments and the disclosures of fair value are not made when the carrying amount ofcurrent financial instruments is a reasonable approximation of its fair value. The fair values of non-currentfinancial instruments may not be disclosed separately unless there are significant differences at the end ofthe reporting year and in the event the fair values are disclosed in the relevant notes.The fair value of a financial instrument is derived from an active market or by using an acceptable valuationtechnique. The appropriate quoted market price for an asset held or liability to be issued is usually the currentbid price without any deduction for transaction costs that may be incurred on sale or other disposal and, foran asset to be acquired or for liability held, the asking price. If there is no market, or the markets availableare not active, the fair value is established by using an acceptable valuation technique.