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SUN INTERNATIONAL ANNUAL REPORT ’10
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are carried in the statement of financial
position at face value. Cash and cash equivalents includes cash on hand,
deposits held at call with banks, and investments in money market
instruments. In the statement of financial position and the statement of
cash flows, bank overdrafts are included in borrowings.
FINANCIAL INSTRUMENTS
Financial instruments carried at the financial reporting date include
available-for-sale investments, loans and receivables, accounts receivable,
cash and cash equivalents, borrowings, derivative financial instruments,
accounts payable and accruals.
Financial instruments are recognised initially at fair value plus, for instruments
not at fair value through profit or loss, any directly attributable transaction
costs. Subsequent to initial recognition, financial instruments are measured
as described below.
The fair value of publicly traded derivatives is based on quoted market
prices at the financial reporting date. The effective value of interest rate
swaps and interest rate cross currency swaps is calculated at the present
value of the estimated future cash flows. The fair value of foreign
exchange contracts is determined using forward exchange market rates
at the financial reporting date. Appropriate market related rates are used
to fair value long term borrowings. Other techniques, such as the discounted
value of estimated future cash flows, are used to determine the fair value
for the remaining financial instruments.
Financial assets
The classification of financial assets depends on the purpose for which the
financial assets were acquired. Management determines the classification
of its financial assets at initial recognition. The financial assets carried at
the financial reporting date are classified as ‘Loans and receivables’ and
‘Available-for-sale investments’.
All purchases and sales of financial assets are recognised on the trade
date, which is the date that the group commits to purchase or sell the
asset. Financial assets are derecognised when the rights to receive cash
flows from the financial assets have expired or have been transferred and
the group has transferred substantially all risks and rewards of ownership.
The group assesses at the end of each financial year whether there is
objective evidence that a financial asset or a group of financial assets is
impaired. A provision for impairment is established where there is objective
evidence that the group will not be able to collect all amounts due according
to the original terms of the loans or receivables. Significant financial
difficulties of the counterparty, and default or delinquency in payments are
considered indicators that the loan or receivable is impaired. The amount
of the provision is the difference between the asset’s carrying amount and
the present value of estimated future cash flows, discounted at the
original effective interest rate. The carrying amount of the asset is reduced
through the use of an allowance account, and the amount of the loss is
recognised in the statement of comprehensive income. When a loan or
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ACCOUNTING POLICIES CONTINUED
receivable is uncollectible, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited in
the statement of comprehensive income.
In the case of equity securities classified as available-for-sale, a significant
or prolonged decline in fair value of a financial asset below its cost is
considered an indicator that the asset is impaired. If any such evidence
exists the cumulative loss (measured as the difference between the
acquisition cost and the current fair value, less any impairment loss on
that financial asset previously recognised in profit or loss) is recognised in
the statement of comprehensive income. Impairment losses are not reversed
through the statement of comprehensive income.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are
classified as non current unless receipt is anticipated within 12 months in
which case the amounts are included in current assets. The group’s loans
and receivables comprise ‘Loans and receivables’, ‘Accounts receivable’
(excluding VAT and prepayments) and ‘Cash and cash equivalents’.
Subsequent to initial recognition, loans and receivables are carried at
amortised cost using the effective interest method.
Available-for-sale investments
Available-for-sale investments are financial assets specifically designated
as available-for-sale or not classified in any of the other categories available
under financial assets. These are included in non current assets unless
management has expressed the intention of holding the investment for
less than 12 months from the financial reporting date, in which case they
are included in current assets.
Available-for-sale investments are carried at fair value. Unrealised gains and
losses arising from changes in the fair value of available-for-sale investments
are recognised in other comprehensive income in the period in which they
arise. When securities classified as available-for-sale are sold or impaired,
the accumulated fair value adjustments recognised in other comprehensive
income are transferred to the statement of comprehensive income.
Financial liabilities at amortised cost
The group’s financial liabilities at the financial reporting date include
‘Borrowings’ and ‘Accounts payable and accruals’ (excluding VAT, employee
related payables and derivatives). These financial liabilities are subsequently
measured at amortised cost using the effective interest method with the
exception of the derivatives which are measured as noted below. Financial
liabilities are included in current liabilities unless the group has an
unconditional right to defer settlement of the liability for at least 12 months
after the financial reporting date.
Derivative financial instruments
The group uses derivative financial instruments, primarily foreign exchange
contracts, cross currency interest rate swaps and interest rate swaps to
hedge its risks associated with foreign currency and interest rate fluctuations