Straco Corporation Limited • Annual Report 2014
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NOTES TO THE FINANCIAL STATEMENTS
3
Significant accounting policies (cont’d)
3.6 Financial instruments (cont’d)
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a
deduction from equity, net of any tax effects.
3.7 Impairment
Impairment of non-derivative financial assets
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 has occurred after the initial recognition of the asset, and
that the loss event had 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, adverse changes in the payment status
of borrowers or issuers of the Branch or economic conditions that correlate with defaults.
The Group considers evidence of impairment for loans and receivables at both a specific asset and collective level. All individually significant receivables
are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for
any impairment that has been incurred but not yet identified. Loans and receivables that are not individually significant are collectively assessed for
impairment by grouping together receivables 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
less than suggested by historical trends.
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 profit or loss and
reflected in an allowance account against receivables. Interest on the impaired asset continues to be recognised. When a subsequent event causes the
amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
Impairment of non-financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated. For goodwill, the
recoverable amount is estimated each year at the same time. An impairment loss is recognised if the carrying amount of an asset or its related cash-
generating unit (“CGU”) exceeds its estimated recoverable amount.
