Annual Report 2011 - PGS

Notes to the consolidated financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(b) Financial assets and liabilities measured at amortized cost
The category includes loans and receivables and other non-derivative financial assets and liabilities with fixed or determinable
payments that are not quoted in an active market. Financial assets and liabilities in the category are initially recognized at fair
value, with addition for directly attributable transaction costs. After initial measurement, financial assets and liabilities in the
category are subsequently carried at amortized cost using the effective interest method less any allowance for impairment.
(c) Financial assets and liabilities measured at fair value through the consolidated statement of comprehensive income
The category includes financial assets and liabilities that are non-derivatives and are either designated as available-for-sale or
not classified in any of the other categories. After initial measurement, financial assets and liabilities in the category are
measured at fair value with unrealized gains or losses being recognized in the consolidated statement of comprehensive
income. When the asset or liability is disposed of, the cumulative gain or loss previously recorded in the consolidated statement
of comprehensive income is recognized in the consolidated statements of operations.
The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to
quoted market prices or dealer price quotations, without any deduction for transaction costs. For financial instruments not traded
in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using
recent arm’s length market’s transaction, reference to the current fair value of other instruments that is substantially the same,
discounted cash flow analysis or other valuation models. An analysis of fair values of financial instruments and further details as
to how they are measured are provided in Note 26.
The Company assesses at end of each reporting period whether there is objective evidence that a financial asset or a group of
financial assets is impaired. In the case of equity instruments designated as available-for-sale, a significant or prolonged decline
in the fair value of the instrument below its cost is considered as an indicator that the instrument is impaired. If any such
evidence exists for available-for-sale financial assets, 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 recognized in the consolidated
statement of operations – is reversed through the consolidated statement of comprehensive income and recognized in the
consolidated statement of operations. Impairment losses recognized in the consolidated statements of operations on equity
instruments are not reversed through the consolidated statements of operations. Impairment testing of trade receivables is
described in Note 26 “Credit risk”.
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks
and characteristics are not closely related to those of host contracts and the host contracts are not carried at fair value through
the consolidated statements of operations.
Treasury shares (own shares)
Own equity instruments which are reacquired (treasury shares) are recorded as a reduction of shareholders’ equity. No gain or
loss is recognized in the consolidated statements of operations on the purchase, sale, issue or cancellation of the Company’s
own equity instruments.
Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Company and held as
treasury shares. Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares
outstanding to assume conversion of all dilutive potential ordinary shares. For diluted earnings per share, diluted potential
ordinary shares are determined independently for each period presented. When the number of ordinary shares outstanding
changes (e.g. share split) the weighted average number of ordinary shares outstanding during all periods presented is adjusted
retrospectively. Basic and diluted earnings per share are presented separately for continuing and discontinued operations.
Classification in the consolidated statements of financial position
An asset or liability is classified as current when it is part of a normal operating cycle, when it is held primarily for trading
purposes, when it falls due within 12 months and when it consists of cash or cash equivalents at the end of the reporting period.
Other items are long-term. A dividend does not become a liability until it has been formally approved by the Annual General
Meeting.
Consolidated statements of cash flows
The Company’s consolidated statements of cash flows is prepared in accordance with the indirect method, where cash flows
from operating activities are incorporated as a part of the consolidated statement of cash flow, and where the cash flows are
divided into operating activities, investing activities and financing activities.
Standards issued but not yet effective (which the Company has not early adopted)
IFRS 7 Financial Instruments – Disclosures (amendment)
The amendment relates to disclosure requirements for financial assets that are derecognised in their entirety, but where the
entity has a continuing involvement. The amendments will assist users in understanding the implications of transfers of financial
assets and the potential risks that may remain with the transferor. The amended IFRS 7 is effective for annual periods beginning
on or after 1 July 2011. The Company will implement the amended IFRS 7 as of 1 January 2012. The amendment affects
disclosure only and has no impact on the Company’s financial position or performance.
The IASB has also introduced new disclosure requirements in IFRS 7. These disclosures, which are similar to the new US
GAAP requirements, would provide users with information that is useful in (a) evaluating the effect of potential effect of netting
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