Notes to the Financial Statements - SingTel

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Notes to the Financial StatementsFor the financial year ended 31 March 20112.7 Fair Value Estimation of Financial Instruments (Cont’d)Forward foreign currency contractsThe fair value of forward foreign exchange contracts is determined using forward exchange market rates for contracts withsimilar maturity profiles at the end of the reporting period.Non-current borrowingsFor disclosure purposes, the fair value of non-current borrowings which are traded in active markets is based on the marketquoted ask price. For other non-current borrowings, the fair values are based on valuation provided by service providers orestimated by discounting the future contractual cash flows using a discount rate based on the borrowing rates which the Groupexpects would be available at the end of the reporting period.2.8 Financial Guarantee ContractsFinancial guarantees issued by the Company prior to 1 April 2010 are recorded initially at fair values plus transaction costs andamortised in the income statement over the period of the guarantee. Financial guarantees issued by the Company on or after1 April 2010 are charged guarantee fees based on fair value and recognised in the income statement when earned.2.9 Trade and Other ReceivablesTrade and other receivables, including loans given by the Company to subsidiaries, associated and joint venture companies, arerecognised initially at fair value and, other than those that meet the definition of equity instruments, are subsequently measuredat amortised cost using the effective interest method, less allowance for impairment.An allowance for impairment of trade and other receivables is established when there is objective evidence that the Groupwill not be able to collect all amounts due according to the original terms of the debts. Loss events include financial difficultyor bankruptcy of the debtor, significant delay in payments and breaches of contracts. The impairment loss, measured as thedifference between the debt’s carrying amount and the present value of estimated future cash flows discounted at the originaleffective interest rate, is recognised in the income statement. When the debt becomes uncollectible, it is written off against theallowance account. Subsequent recoveries of amounts previously written off are recognised in the income statement.2.10 Trade and Other PayablesTrade and other payables are initially recognised at fair value and subsequently measured at amortised cost using the effectiveinterest method.2.11 BorrowingsBorrowings are initially recognised at fair value of the consideration received less directly attributable transaction costs. Afterinitial recognition, unhedged borrowings are subsequently stated at amortised cost using the effective interest method. Hedgedborrowings are accounted for in accordance with the accounting polices set out in Note 2.6.1.108 SINGAPORE TELECOMMUNICATIONS LIMITED AND SUBSIDIARY COMPANIES
Notes to the Financial StatementsFor the financial year ended 31 March 20112.12 Cash and Cash EquivalentsFor the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand, balances withbanks and fixed deposits with original maturity of three months or less, net of bank overdrafts which are repayable on demandand which form an integral part of the Group’s cash management.Bank overdrafts are included under borrowings in the statement of financial position.2.13 Foreign Currencies2.13.1 Functional and presentation currencyItems included in the financial statements of each entity in the Group are measured using the currency of the primary economicenvironment in which the entity operates (the “functional currency”). The statement of financial position and statement ofchanges in equity of the Company and consolidated financial statements of the Group are presented in Singapore Dollar, whichis the functional and presentation currency of the Company and the presentation currency of the Group.2.13.2 Transactions and balancesTransactions in a currency other than the functional currency (“foreign currency”) are translated into the functional currency atthe exchange rates prevailing at the date of the transactions. Monetary assets and liabilities denominated in foreign currenciesat the end of the reporting period are translated at exchange rates ruling at that date. Foreign exchange differences arising fromtranslation are recognised in the income statement.2.13.3 Translation of foreign operations’ financial statementsIn the preparation of the consolidated financial statements, the assets and liabilities of foreign operations are translated toSingapore Dollar at exchange rates ruling at the end of the reporting period except for share capital and reserves which aretranslated at historical rates of exchange (see Note 2.13.4 for translation of goodwill and fair value adjustments).Income and expenses in the income statement are translated using either the average exchange rates for the month or year,which approximate the exchange rates at the dates of the transactions. All resulting translation differences are taken directlyto ‘Other Comprehensive Income’.On loss of control of a subsidiary, loss of significant influence of an associated company or loss of joint control of a jointventure company, the accumulated translation differences relating to that foreign operation are reclassified from equity to theconsolidated income statement as part of gain or loss on disposal.On partial disposal where there is no loss of control of a subsidiary, the accumulated translation differences relating to thedisposal are reclassified to non-controlling interests. For partial disposals of associated or joint venture companies, theaccumulated translation differences relating to the disposal are taken to the consolidated income statement.2.13.4 Translation of goodwill and fair value adjustmentsGoodwill and fair value adjustments arising on the acquisition of foreign entities completed on or after 1 April 2005 are treatedas assets and liabilities of the foreign entities and are recorded in the functional currencies of the foreign entities and translatedat the exchange rates prevailing at the end of the reporting period. However, for acquisitions of foreign entities completed priorto 1 April 2005, goodwill and fair value adjustments continue to be recorded at the exchange rates at the respective dates ofthe acquisitions.2.13.5 Net investment in a foreign entityThe exchange differences on loans from the Company to its subsidiaries which form part of the Company’s net investment inthe subsidiaries are included in ‘Currency Translation Reserve’. On disposal of the foreign entity, the accumulated exchangedifferences deferred in the ‘Currency Translation Reserve’ are reclassified to the consolidated income statement in a similarmanner as described in Note 2.13.3.ANNUAL REPORT 2010/2011 109
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Notes to the Financial Statements - SingTel

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