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HG METAL MANUFACTURING LIMITED
ANNUAL REPORT 2014
NOTES TO THE
FINANCIAL STATEMENTS
for the financial year ended 31 December 2014
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.13 Impairment of financial assets (cont’d)
(a)
Financial assets carried at amortised cost (cont’d)
If there is objective evidence that an impairment loss on financial assets carried at amortised
cost has been incurred, the amount of the loss is measured as the difference between the
asset’s carrying amount and the present value of estimated future cash flows discounted
at the financial asset’s original effective interest rate. If a loan has a variable interest rate,
the discount rate for measuring any impairment loss is the current effective interest rate.
The carrying amount of the asset is reduced through the use of an allowance account. The
impairment loss is recognised in profit or loss.
When the asset becomes uncollectible, the carrying amount of impaired financial assets is
reduced directly or if an amount was charged to the allowance account, the amounts charged
to the allowance account are written off against the carrying value of the financial asset.
To determine whether there is objective evidence that an impairment loss on financial assets
has been incurred, the Group considers factors such as the probability of insolvency or
significant financial difficulties of the debtor and default or significant delay in payments.
If in a subsequent period, the amount of the impairment loss decreases and the decrease
can be related objectively to an event occurring after the impairment was recognised, the
previously recognised impairment loss is reversed to the extent that the carrying amount of
the asset does not exceed its amortised cost at the reversal date. The amount of reversal is
recognised in profit or loss.
(b)
Available-for-sale financial assets
In the case of equity investments classified as available-for-sale, objective evidence of
impairment include (i) significant financial difficulty of the issuer or obligor, (ii) information
about significant changes with an adverse effect that have taken place in the technological,
market, economic or legal environment in which the issuer operates, and indicates that the
cost of the investment in equity instrument may not be recovered; and (iii) a significant or
prolonged decline in the fair value of the investment below its costs.
If an available-for-sale financial asset is impaired, an amount comprising the difference
between its acquisition cost (net of any principal repayment and amortisation) and its current
fair value, less any impairment loss previously recognised in profit or loss is transferred from
other comprehensive income and recognised in profit or loss. Reversals of impairment losses
in respect of equity instruments are not recognised in profit or loss; increase in their fair value
after impairment are recognised directly in other comprehensive income.
