NOTES TO FINANCIAL STATEMENTS
December 31, 2015
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Hedge accounting
The Group designates certain hedging instruments of derivatives as cash flow hedges. Hedges of foreign exchange
risk on firm commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship the entity documents the relationship between the hedging instrument and
hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions.
Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging
instrument that is used in a hedging relationship is highly effective in offsetting changes in fair values or cash flows
of the hedged item.
Note 16 contain details of the fair values of the derivative instruments used for hedging purposes. Movements in the
hedging reserve in other comprehensive income are also detailed in Note 21.
Cash flow hedge
The effective portion of changes in fair value of derivatives that are designed and qualify as cash flow hedges are
recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised
immediately in profit or loss as part of other gains and losses.
Amounts recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss
in the periods when the hedged item is recognised in profit or loss in the same line of the consolidated statement
of profit or loss and consolidated statement of comprehensive income as the recognised hedged item. However,
when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial
liability, the gains and losses previously accumulated in equity are transferred from equity and included in the initial
measurement of the cost of the asset or liability.
Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires
or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any gain or loss accumulated in
equity at that time remains in equity and when the forecast transaction is ultimately recognised in profit or loss, such
gains and losses are recognised in profit or loss, or transferred from equity and included in the initial measurement
of the cost of the asset or liability as described above. When a forecast transaction is no longer expected to occur, the
cumulative gain or loss that was accumulated in equity is recognised immediately in profit or loss.
Offsetting arrangements
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position
when the Company and the Group has a legally enforceable right to set off the recognised amounts; and intends
either to settle on a net basis, or to realise the asset and settle the liability simultaneously. A right to set-off must be
available today rather than being contingent on a future event and must be exercisable by any of the counterparties,
both in the normal course of business and in the event of default, insolvency or bankruptcy.
LEASES – Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.
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