Financial assets (CONTINUED)
Financial assets at fair value through profit or loss
Financial assets at FVTPL represent financial assets held for trading . A financial asset is classified as held for trading if:
• it has been acquired principally for the purpose of selling in the near future; or
• it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or
• it is a derivative that is not designated and effective as a hedging instrument.
Financial assets at FVTPL are measured at fair value, with changes in fair value arising from remeasurement recognised directly in profit or loss in the period in which they arise . The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the financial assets .
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market . Subsequent to initial recognition, loans and receivables (including trade and other receivables and bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment loss on financial assets below) .
Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated or not classified as financial assets at FVTPL, loans and receivables or held-to-maturity investments .
Available-for-sale financial assets are measured at fair value at the end of the reporting period . Changes in fair value are recognised in other comprehensive income and accumulated in investment revaluation reserve, until the financial asset is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously accumulated in the investment revaluation reserve is reclassified to profit or loss (see accounting policy on impairment loss on financial assets below) .
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 201058 CHINA MINING RESOURCES GROUP LIMITED ANNUAL REPORT 2010
4. SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED) Financial instruments (CONTINUED)Financial assets (CONTINUED)
Impairment of financial assets (CONTINUED)
For all other financial assets, objective evidence of impairment could include: • significant financial difficulty of the issuer or counterparty; or
• breach of contract, such as default or delinquency in interest or principal payments; or • it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or • the disappearance of an active market for that financial asset because of financial difficulties. For certain categories of financial asset, such as trade and other receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis . Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the credit period ranging from 90 to 180 days, observable changes in national or local economic conditions that correlate with default on receivables .
For financial assets carried at amortised cost, an impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate .
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and other receivables, where the carrying amount is reduced through the use of an allowance account . Changes in carrying amount of the allowance account are recognised in profit or loss . When a trade and other receivable is considered uncollectible, it is written off against the allowance account . Subsequent recoveries of amounts previously written off are credited to profit or loss .
For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment losses was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised .
Impairment losses on available-for-sale equity investments will not be reversed in profit or loss in subsequent periods . Any increase in fair value subsequent to impairment loss is recognised directly in other comprehensive income and accumulated in investment revaluation reserve .
Financial liabilities and equity
Financial liabilities and equity instruments issued by a group entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and equity instrument .
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities . The Group’s financial liabilities are generally classified into other financial liabilities .
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 20104. SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED) Financial instruments (CONTINUED)Financial liabilities and equity (CONTINUED) Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period . The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period .
Interest expense is recognised on an effective interest basis . Other financial liabilities
Other financial liabilities (including trade and other payables, amounts due to jointly controlled entities and non-controlling shareholders, bank borrowings, other borrowings and other long-term payables) are subsequently measured at amortised cost, using the effective interest method .
Non-redeemable convertible preference shares contains liability and equity components
Non-redeemable convertible preference shares issued by the Group that contain both the liability and conversion option components are classified separately into respective items on initial recognition . Conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company’s own equity instruments is classified as an equity instrument .
Non-redeemable convertible preference shares are classified as a liability if interest payments are not discretionary . On initial recognition, the fair value of the liability component is determined using the prevailing market interest of similar non-convertible debts . The difference between the gross proceeds of the issue of the non-redeemable preference shares and the fair value assigned to the liability component, representing the conversion option for the holder to convert the shares into equity, is included in equity . In subsequent periods, the liability component of the non-redeemable preference shares are carried at amortised cost using the effective interest method . The equity component will remain in equity until the conversion options are exercised and will be transferred to share capital and share premium of the Company .
Equity instruments
Equity instruments issued by the group entities are recorded at the proceeds received, net of direct issue costs .
Derecognition
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 201060 CHINA MINING RESOURCES GROUP LIMITED ANNUAL REPORT 2010