Positioning for the Future | 127
Appendix
Notes to the Financial Statements
Year ended 31 December 2014
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(cont’d)
2.8 Financial instruments
(cont’d)
(d) Financial guarantees
Financial guarantee contracts are classimed as mnancial liabilities unless the Group has previously asserted
explicitly that it regards such contracts as insurance contracts and accounted for them as such.
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Such mnancial guarantees are recognised initially at fair value and are classimed as mnancial liabilities.
Subsequent to initial measurement, the mnancial guarantees are stated at the higher of the initial fair value less
cumulative amortisation and the amount that would be recognised if they were accounted for as contingent
liabilities. When mnancial guarantees are terminated before their original expiry date, the carrying amount of
the mnancial guarantees is transferred to the promt or loss.
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These mnancial guarantees are accounted for as insurance contracts. Provision is recognised based on the
Group’s estimates of the ultimate cost of settling all claims incurred but unpaid at the end of the reporting
period.
The provision is assessed by reviewing individual claims and tested for adequacy by comparing the amount
recognised and the amount that would be required to settle the guarantee contract.
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A mnancial asset not carried at fair value through promt or loss, including an interest in an associate and joint
venture, is assessed at each reporting period to determine whether there is any objective evidence that it is
impaired. A mnancial asset is impaired if objective evidence indicates that a loss event has been occurred
after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future
cash nows of that asset that can be estimated reliably.
Objective evidence that mnancial assets (including equity securities) are impaired can include default
or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would
not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the
payment status of borrowers or issuers in the Group, economic conditions that correlate with defaults or the
disappearance of an active market for a security.
All individually signimcant mnancial assets are assessed for specimc impairment on an individual basis.
All individually signimcant mnancial assets found not to be specimcally impaired are then collectively assessed
for any impairment that has incurred but not yet identimed. The remaining mnancial assets that are not
individually signimcant are collectively assessed for impairment by grouping together such instruments with
similar risk characteristics.
In assessing collective impairment, the Group uses historical trends of the probability of default, timing of
recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current
economic and credit conditions are such that the actual losses are likely to be greater or lesser than that
suggested by historical trends.
