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2.
Significant accounting policies (continued)
2.14 Financial Instruments (Continued)
(b)
Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount is presented in the balance sheets when, and only when,
the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset
and settle the liability simultaneously.
(c)
Non-derivative financial liabilities
Financial liabilities are recognised when, and only when, the Group becomes a party to the contractual provisions of
the financial instrument.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.
The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities
are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition,
these financial liabilities are measured at amortised cost using the effective interest method.
(d)
Derivative financial instruments and hedging activities
A derivative financial instrument is initially recognised at its fair value on the date the contract is entered into and is
subsequently carried at its fair value. The method of recognising the resulting gain or loss depends on whether the
derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates
each hedge as either: (i) fair value hedge; or (ii) cash flow hedge.
Fair value changes on derivatives that are not designated or do not qualify for hedge accounting are recognised in
profit or loss when the changes arise.
The Group documents at the inception of the transaction the relationship between the hedging instruments and hedged
items, as well as its risk management objective and strategies for undertaking various hedge transactions. The Group
also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives designated
as hedging instruments are highly effective in offsetting changes in fair value or cash flows of the hedged items.
The carrying amount of a derivative designated as a hedge is presented as a non-current asset or liability if the remaining
expected life of the hedged item is more than 12 months, and as a current asset or liability if the remaining expected
life of the hedged item is less than 12 months. The fair value of a trading derivative is presented as a current asset
or liability.
(i)
Fair value hedge
The Group has entered into currency forwards that are fair value hedges for currency risk arising from its
firm commitments for purchases and sales denominated in foreign currencies. The fair value changes on the
hedged item resulting from currency risk are recognised in profit or loss. The fair value changes on the effective
portion of currency forwards designated as fair value hedges are recognised in profit or loss within the same
line item as the fair value changes from the hedged item. The fair value changes on the ineffective portion of
currency forwards are recognised separately in profit or loss.
