2012 Annual Report - ZTE

ZTE CORPORATIONNotes to Financial Statements (continued)(Prepared in accordance with PRC ASBEs)(All amounts in RMB’000 unless otherwise stated)(English translation for reference only)II.PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)9. Financial instruments (continued)Impairment of financial assets (continued)Assets carried at amortised cost (continued)For a financial asset that is individually significant, the Group assesses the asset individually forimpairment if there is objective evidence of impairment, and recognizes the amount of impairmentin profit or loss. For a financial asset that is not individually significant, the Group include the assetin a group of financial assets with similar credit risk characteristics and collectively assess them forimpairment. If it is determined that no objective evidence of impairment exists for an individuallyassessed financial asset, whether the financial asset is individually significant or not, the financialasset is included in a group of financial assets with similar credit risk characteristics and collectivelyassessed for impairment. Financial assets, for which an impairment loss is individually recognized, arenot included in the collective assessment for impairment.After the Group recognizes impairment loss of financial assets carried at amortized cost, if there isobjective evidence that the financial assets’ value recovered and the recovery is objectively related toan event occurring after the impairment is recognized, the previously recognized impairment loss shallbe reversed and recognized in profit or loss. However the reversal shall not result in a carrying amountof the financial asset that exceeds what the amortized cost would have been had the impairment notbeen recognized at the date when the impairment is reversed.Available-for-sale financial assetsIf an available-for-sale financial asset is impaired, the cumulative loss arising from decline in fair valuethat had been recognized directly in capital reserves is removed from capital reserves and recognizedin profit or loss. The cumulative loss that is removed from capital reserves is the difference betweenits acquisition cost (net of any principal repayment and amortization) and its current fair value, lessany impairment loss previously recognized in profit or loss.Objective evidence of impairment in equity instruments available-for-sale includes a significant orprolonged decline in their fair value. The exercise of judgement is required in determining whether suchdecline is “significant” or “prolonged.” Whether the decline is “significant” or not shall be determinedby reference to the extent to which the fair value is lower the cost. Whether the decline is “prolonged”or not shall be determined by reference to the duration in which the fair value is lower than the cost.Impairment losses recognized for equity instruments classified as available-for-sale are not reversedthrough profit or loss. Fair value gains that arise after the impairment are directly recognized in othercomprehensive income.If after an impairment loss has been recognized on an available-for-sale debt instrument, the fair valueof the debt instrument increases in a subsequent period whereby the increase can be objectively relatedto an event occurring after the impairment losses were recognized, the impairment loss is reversedwhich is recognized in profit or loss.172