0175 Geely Automobile Holdings Limited Annual Report 2011

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Annual Report 2011Geely Automobile Holdings LimitedNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSFor the year ended 31 December 20115. Significant Accounting Policies (Continued)(g)Financial instruments (Continued)Loss events in respect of a group of financial assets include observable data indicating that there is ameasurable decrease in the estimated future cash flows from the group of financial assets. Such observabledata includes but is not limited to adverse changes in the payment status of debtors in the group and,national or local economic conditions that correlate with defaults on the assets in the group.Impairment losses are reversed in subsequent periods when an increase in the asset’s recoverable amountcan be related objectively to an event occurring after the impairment was recognised, subject to a restrictionthat the carrying amount of the asset at the date the impairment is reversed does not exceed what theamortised cost would have been had the impairment not been recognised.Available-for-sale financial assetsNon-derivative financial assets that do not qualify for inclusion in any of the other categories of financialassets are classified as available-for-sale financial assets.All financial assets within this category are subsequently measured at fair value. Any gain or loss arising froma change in the fair value excluding any dividend and interest income is recognised in other comprehensiveincome and accumulated separately in the available-for-sale financial assets revaluation reserve in equity,except for impairment losses (see the policy below) and foreign exchange gains and losses on monetaryassets, until the financial asset is derecognised, at which time the cumulative gain or loss is reclassifiedfrom equity to the consolidated income statement. Interest calculated using the effective interest methodis recognised in the consolidated income statement.Investments in equity instruments that do not have a quoted market price in an active market and whosefair value cannot be reliably measured are measured at cost less any identified impairment losses at eachbalance sheet date subsequent to initial recognition.When a decline in the fair value of an available-for-sale financial asset has been recognised in othercomprehensive income and accumulated in equity and there is objective evidence that the asset is impaired,the cumulative loss that had been recognised in other comprehensive income is removed from equityand recognised in the consolidated income statement as an impairment loss. That amount is measuredas the difference between the asset’s acquisition cost (net of any principal repayment and amortisation)and current fair value, less any impairment loss on that asset previously recognised in the consolidatedincome statement.Reversals of impairment losses in respect of investment in equity instruments classified as available-forsaleand stated at fair value are not recognised in the consolidated income statement. The subsequentincrease in fair value is recognised in the other comprehensive income. Impairment losses in respect ofdebt securities are reversed if the subsequent increase in fair value can be objectively related to an eventoccurring after the impairment loss was recognised. Reversal of impairment losses in such circumstancesare recognised in the consolidated income statement.71
Annual Report 2011Geely Automobile Holdings LimitedNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSFor the year ended 31 December 20115. Significant Accounting Policies (Continued)(g)Financial instruments (Continued)Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss are divided into two subcategories, including financialassets held for trading and those designated as financial assets at fair value through profit or loss on initialrecognition.A financial asset is classified as held for trading if:• it has been acquired principally for the purpose of selling in the near future; or• it is a part of an identified portfolio of financial instruments that the Group manages together andhas a recent actual pattern of short-term profit-taking; or• it is a derivative that is not designated and effective as a hedging instrument.A financial asset other than a financial asset held for trading may be designated as a financial asset at fairvalue through profit or loss upon initial recognition if:• such designation eliminates or significantly reduces a measurement or recognition inconsistencythat would otherwise arise; or• the financial asset forms part of a group of financial assets or financial liabilities or both, which ismanaged and its performance is evaluated on a fair value basis, in accordance with the Group’sdocumented risk management or investment strategy, and information about the grouping is providedinternally on that basis; or• it forms part of a contract containing one or more embedded derivatives, and HKAS 39 permitsthe entire combined contract (asset or liability) to be designated as a financial asset at fair valuethrough profit or loss.At each balance sheet date subsequent to initial recognition, financial assets at fair value through profit orloss are measured at fair value, with changes in fair value recognised directly in the consolidated incomestatement in the period in which they arise. The net gain or loss recognised in the consolidated incomestatement includes any dividend or interest earned on the financial assets.Financial liabilities and equity instrumentsFinancial liabilities and equity instruments issued by the Group are classified according to the substance of thecontractual arrangements entered into and the definitions of a financial liability and an equity instrument.Other financial liabilitiesOther financial liabilities (including borrowings and trade and other payables) are initially recognised at theirfair values, and are subsequently measured at amortised cost, using the effective interest method.72
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0175 Geely Automobile Holdings Limited Annual Report 2011

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