confidence - Investing In Africa

Financial StatementsNotes to the Accounts for the year ended 30 June 2005 (cont’d)(k)Derivative Financial InstrumentsDerivative financial instruments are initially recorded at cost and are measured at fair value at subsequent reportingdates. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting arerecognised in the Statement of Income as Other Income.(l)AcceptancesAcceptances are obligations by the Group to pay on due dates the bills of exchange drawn on customers and acceptedby them. The Group expects most of these acceptances to be honoured by the customers on due dates. Acceptancesare accounted for as off-balance sheet items and are disclosed as contingent liabilities.(m)Sale and Repurchase AgreementsGilt-edged securities sold subject to linked repurchase agreements (“repos”) are retained in the Balance Sheet and thecounterparty liability is included in Borrowings. Gilt-edged securities purchased under agreements to resell (“reverserepos”) are recorded as balances due from other banks. The differences between the sale and repurchase price istreated as interest and accrued over the life of the repo agreements using the effective interest method.(n)Tangible Fixed AssetsTangible fixed assets are stated at cost (except for freehold land and buildings) less accumulated depreciation, less anyimpairment loss. Freehold land is stated at revalued amounts and buildings are stated at revalued amounts lessaccumulated depreciation, less any impairment loss.It is the Group's policy to revalue its freehold land and buildings at least every five years by independent valuers. Anyrevaluation surplus is credited to Property Revaluation Reserve. Any revaluation decrease is first charged directly againstany Property Revaluation Reserve held in respect of the same asset, and then to the Statement of Income.Depreciation is calculated to write off the cost or revalued amounts of tangible fixed assets over their estimated usefullives on a straight line basis.34No depreciation is provided on freehold land.The principal rates are:BuildingsPlant, Machinery, Furniture, Fittings and Computer EquipmentMotor VehiclesOver 50 yearsOver 3 - 10 yearsOver 5 yearsDepreciation is calculated from the month the asset is capitalised.Gains and losses on disposal of tangible fixed assets are included within Other Income in the Statement of Income.Each year the difference, net of the impact of deferred tax, between the depreciation based on the revalued carryingamount of the asset (the depreciation charged to income statement) and the depreciation based on the asset’s originalcost is transferred from Property Revaluation Reserve to Revenue Reserve.(o)Leasing(i) The Group as lessorAmounts due from lessees under finance leases are recorded as loans and advances in the Group Balance Sheet atthe amount of the Group’s net investment in the leases. Finance lease income is allocated to accounting periods soas to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.