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AfrAsia Bank Limited and its Group Entities
Annual Report 2015
page 202
noteS to the finanCial StatementS
for the year ended 30 June 2015
2. ACCOUNTING POLICIES (CONTINUED)
2.5 Summary of significant accounting policies (Continued)
(b) Financial instruments - initial recognition and subsequent measurement (Continued)
(vii) Available-for-sale financial investments
Available-for-sale investments include equity securities and investment in preference shares. Equity investments classified as available-for-sale are those which are
neither classified as held-for-trading nor designated at fair value through profit or loss.
The Group has not designated any loans or receivables as available-for-sale.
After initial measurement, available-for-sale financial investments are subsequently measured at fair value.
Unrealised gains and losses are recognised directly in equity (‘Other comprehensive income’) in the available-for-sale reserve. When the investment is disposed of, the
cumulative gain or loss previously recognised in equity is recognised in the statements of profit or loss and other comprehensive income in ‘Other operating income’.
Where the Group holds more than one investment in the same security, they are deemed to be disposed of on a first–in first–out basis. Dividends earned whilst holding
available-for-sale financial investments are recognised in the statements of profit or loss and other comprehensive income as ‘Other operating income’ when the
right to receive the income has been established. The losses arising from impairment of such investments are recognised in the statements of profit or loss and other
comprehensive income and removed from the available-for-sale reserve.
(viii) Due from banks and loans and advances to customers
‘Due from banks’ and ‘Loans and advances to customers’ include non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market, other than:
those that the Group intend to sell immediately or in the near term and those that the Group, upon initial recognition, designates as at fair value through profit or loss;
those that the Group upon initial recognition, designates as available-for-sale;
those for which the Group may not recover substantially all of its initial investment, other than because of credit deterioration.
After initial measurement, amounts ‘Due from banks’ and ‘Loans and advances to customers’ are subsequently measured at amortised cost using the EIR, less
allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of
the EIR. The amortisation is included in ‘Interest income’ in the statements of profit or loss and other comprehensive income. The losses arising from impairment are
recognised in the statements of profit or loss and other comprehensive income in ‘Net allowance for credit impairment’.
The Group may enter into certain lending commitments where the loan on drawdown, is expected to be classified as held-for-trading because the intent is to sell the
loans in the short term. These commitments to lend are recorded as derivatives and measured at fair value through profit or loss.
Where the loan, on drawdown, is expected to be retained by the Group, and not sold in the short term, the commitment is recorded only when the commitment is an
onerous contract that is likely to give rise to a loss (e.g., due to a counterparty credit event).
(ix) Debts issued
Financial instruments issued by the Group that are not designated at fair value through profit or loss, are classified as liabilities under ‘Debts issued’ where the
substance of the contractual arrangement results in the Group having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the
obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity shares.
After initial measurement, debts issued and other borrowed funds are subsequently measured at amortised cost using the EIR method. Amortised cost is calculated
by taking into account any discount or premium on the issue and costs that are an integral part of the EIR. An analysis of the Group’s and the Bank’s issued debt is
disclosed in Note 28 to the financial statements.