continued - The Lion Group

3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(n) Financial Instruments (continued)
(iv) Payables
Payables are stated at cost which is the fair value of the consideration to be paid in the future for
goods and services received.
(v) Interest Bearing Borrowings
Borrowings are initially recognised based on the proceeds received, net of transaction costs incurred. In
subsequent periods, borrowings are stated at amortised cost and any difference between net proceeds
and redemption value is recognised in the income statement over the period of the borrowing using
the effective yield method.
Bonds and debts are stated at net present value plus accreted interest and net of amortised issuance
expenses. The accretion of interest on the bonds or debts is recognised as interest expenses on the
basis of their underlying cash yield-to-maturity.
Borrowing costs incurred to finance the construction of property, plant and equipment are capitalised
as part of the cost of the asset until the asset is ready for its intended use.
All other borrowing costs are recognised as an expense in the income statement in the period they
are incurred.
(vi) Preference Shares (“PS”)
PS are recorded at the amount of proceeds received, net of transaction costs.
PS are classified as non-current liabilities in the balance sheet and the preferential dividends are
recognised as finance costs in the income statement in the period they are incurred.
(vii) Redeemable Convertible Secured Loan Stocks (“RCSLS”)
The RCSLS are regarded as compound instruments, consisting of a liability component and an equity
component. At the date of issue, the fair value of the liability component is estimated using the
prevailing market interest rate for a similar non-convertible bond. The difference between the proceeds
of issue of the convertible loan stocks and the fair value assigned to the liability component represents
the conversion options included in equity. The liability component is subsequently stated at amortised
cost using the effective interest rate method until extinguished on conversion or redemption, whilst
the value of the equity component is not adjusted in subsequent periods. Attributable transaction
costs are apportioned and deducted directly from the liability and equity component based on their
carrying amounts at the date of issue.
(viii) Derivative Financial Instruments
Derivative financial instruments are not recognised in the financial statements.
(ix) Equity Instruments
Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the
period in which they are declared.
The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax.
Equity transaction costs comprise only those incremental external costs directly attributable to the
equity transaction which would otherwise have been avoided.
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