FINANCIAL STATEMENTS - Mewah Group

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MEWAH INTERNATIONAL INC.NOTES TOTHE FINANCIAL STATEMENTSFor the financial year ended 31 December 20122. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)2.9 Financial assets (continued)(a) Classification (continued)(iv) Available-for-sale financial assetsAvailable-for-sale financial assets, are non-derivatives that are either designated in this category or not classified in any ofthe other categories. They are presented as non-current assets unless the investment matures or management intends todispose of the assets within 12 months after the statement of financial position date.(b) Recognition and derecognitionRegular way purchases and sales of financial assets are recognised on trade date - the date on which the Group commits topurchase or sell the asset.Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or havebeen transferred and the Group has transferred substantially all risks and rewards of ownership. On disposal of a financialasset, the difference between the carrying amount and the sale proceeds is recognised in profit or loss. Any amount in othercomprehensive income relating to that asset is reclassified to profit or loss.(c) Initial measurementFinancial assets are initially recognised at fair value plus transaction costs except for financial assets at fair value throughprofit or loss, which are recognised at fair value. Transaction costs for financial assets at fair value through profit or loss arerecognised immediately as expenses.(d) Subsequent measurementAvailable-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value.Loans and receivables and held-to-maturity financial assets are subsequently carried at amortised cost using the effectiveinterest method.Changes in the fair values of financial assets at fair value through profit or loss including the effects of currency translation,interest and dividends, are recognised in profit or loss when the changes arise.Interest and dividend income on available-for-sale financial assets are recognised separately in profit or loss. Changes inthe fair values of available-for-sale debt securities (i.e. monetary items) denominated in foreign currencies are analysed intocurrency translation differences on the amortised cost of the securities and other changes; the currency translation differencesare recognised in profit or loss and the other changes are recognised in other comprehensive income and accumulated in thefair value reserve. Changes in fair values of available-for-sale equity securities (i.e. non-monetary items) are recognised in othercomprehensive income and accumulated in the fair value reserve, together with the related currency translation differences.58
ANNUAL REPORT 2012NOTES TOTHE FINANCIAL STATEMENTSFor the financial year ended 31 December 20122. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)2.9 Financial assets (continued)(e) ImpairmentThe Group assesses at each statement of financial position date whether there is objective evidence that a financial asset or agroup of financial assets is impaired and recognises an allowance for impairment when such evidence exists.(i)Loans and receivables/held-to-maturity financial assetsSignificant financial difficulties of the debtor, probability that the debtor will enter bankruptcy, and default or significantdelay in payments are objective evidence that these financial assets are impaired.The carrying amount of these assets is reduced through the use of an impairment allowance account which is calculatedas the difference between the carrying amount and the present value of estimated future cash flows, discounted at theoriginal effective interest rate. When the asset becomes uncollectible, it is written off against the allowance account.Subsequent recoveries of amounts previously written off are recognised against the same line item in profit or loss.The impairment allowance is reduced through profit or loss in a subsequent period when the amount of impairment lossdecreases and the related decrease can be objectively measured. The carrying amount of the asset previously impairedis increased to the extent that the new carrying amount does not exceed the amortised cost had no impairment beenrecognised in prior periods.(ii) Available-for-sale financial assetsIn addition to the objective evidence of impairment described in Note 2.9(e)(i), a significant or prolonged decline in the fairvalue of an equity security below its cost is considered as an indicator that the available-for-sale financial asset is impaired.If any evidence of impairment exists, the cumulative loss that was previously recognised in other comprehensive incomeis reclassified to profit or loss. The cumulative loss is measured as the difference between the acquisition cost (net of anyprincipal repayments and amortisation) and the current fair value, less any impairment loss previously recognised as anexpense. The impairment losses recognised as an expense on equity securities are not reversed through profit or loss.(f) Offsetting financial instrumentsFinancial assets and liabilities are offset and the net amount reported in the statement of financial position when there is alegally enforceable right to offset and there is an intention to settle on a net basis or realise the asset and settle the liabilitysimultaneously.2.10 Financial guaranteesThe Company has issued corporate guarantees to banks for borrowings of its subsidiaries. These guarantees are financial guaranteesas they require the Company to reimburse the banks if the subsidiaries fail to make principal or interest payments when due inaccordance with the terms of their borrowings.59
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