Notes to The
Financial Statements
Year ended 31 December 2015
3 Significant accounting policies (Cont’d)
3.4 Financial instruments (cont’d)
Derivative financial instruments, including hedge accounting (cont’d)
Derivatives are recognised initially at fair value; any attributable transaction costs are recognised in the Statement
of Total Return as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes
therein are accounted for as described below.
Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to
a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could
affect the Statement of Total Return, the effective portion of changes in the fair value of the derivative is recognised
in the hedging reserve in Unitholders’ funds. The amount recognised in hedging reserve is removed and included
in the Statement of Total Return in the same period as the hedged cash flows affect profit or loss under the same
line item in the Statement of Total Return as the hedged item. Any ineffective portion of changes in the fair value
of the derivative is recognised immediately in the Statement of Total Return.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated,
exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast
transaction is no longer expected to occur, then the balance in the hedging reserve is recognised immediately in
the Statement of Total Return. In other cases, the amount recognised in the hedging reserve is transferred to the
Statement of Total Return in the same period that the hedged item affects the Statement of Total Return.
Other non-trading derivatives
When a derivative financial instrument is not designated in a hedge relationship that qualifies for hedge accounting,
all changes in its fair value are recognised immediately in the Statement of Total Return.
3.5 Impairment
Non-derivative financial assets (including receivables)
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine
whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates
that a loss event(s) has occurred after the initial recognition of the asset, and that the loss event(s) has a negative
effect on the estimated future cash flows of that asset that can be estimated reliably.
Objective evidence that financial assets 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, or indications that a debtor
or issuer will enter bankruptcy or the disappearance of an active market for a security.
The Group considers evidence of impairment for receivables at a specific asset level. All individually significant
receivables are assessed for specific impairment.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s
original effective interest rate. Losses are recognised in the Statement of Total Return and reflected in an allowance
account against receivables. When a subsequent event causes the amount of impairment loss to decrease, the
decrease in impairment loss is reversed through the Statement of Total Return.
104
ParkwayLife REIT
Annual Report 2015
