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At each reporting date the carrying amounts of assets held in this category are reviewed to determine
whether there is any objective evidence of impairment. If there is objective evidence, the recoverable
amount is estimated and compared with the carrying amount. If the estimated recoverable amount is
lower, the carrying amount is reduced to its estimated recoverable amount, and an impairment loss is
recognised immediately in profit or loss.
Financial instruments at fair value
All other financial instruments, including equity instruments that are publicly traded or whose fair
value can otherwise be measured reliably without undue cost or effort are measured at fair value
through profit and loss.
Financial assets are derecognised when the rights to receive cash flow from the investments have
expired or have been transferred and the organisation has transferred substantially all risks and
rewards of ownership.
2.8 LEASES
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental
to ownership to the lessee. All other leases are operating leases. A lease is classified as an operating
lease if it does not transfer substantially all the risks and rewards incidental to ownership.
Operating leases – lessor
Operating lease income is recognised as an income on a straight-line basis over the lease term unless:
another systematic basis is representative of the time pattern of the benefit from the leased asset,
even if the receipt of payments is on that basis, or
the payments are structured to increase in line with expected general inflation (based on published
indexes or statistics) to compensate for the lessor’s expected inflationary cost increases.
Initial direct costs incurred in negotiating and arranging operating leases are added to the carrying
amount of the leased asset and recognised as an expense over the lease term on the same basis as
the lease income.
Operating leases – lessee
Operating lease payments are recognised as an expense on a straight-line basis over the lease
term unless:
another systematic basis is representative of the time pattern of the benefit from the leased asset,
even if the payments are not on that basis, or
the payments are structured to increase in line with expected general inflation (based on pub-
lished indexes or statistics) to compensate for the lessor’s expected inflationary cost increases.
Any contingent rents are expensed in the period they are incurred.
2.9 INVENTORIES
Inventories are measured at the lower of cost and estimated selling price less costs to complete and
sell, on the weighted average cost basis.
2.10 TRADE AND OTHER RECEIVABLES
Trade receivables are measured at initial recognition at fair value and subsequently calculated at
amortised cost using the effective interest rate method. Appropriate provisions for estimated
irrecoverable amounts are recognised in profit or loss when there is objective proof that the assets
are irrecoverable. Significant financial problems of the debtor, the likelihood that the debtor will
be declared bankrupt or undergo financial restructuring and default or arrears of payments are
considered as indicators that trade debtors are subject to impairment. The recognised provisions
are calculated as the difference between the asset’s carrying amount and the present value of the
estimated future cash flow, discounted at the effective interest rate method with initial recognition.
The carrying amount of the asset is reduced by the use of a provisioning account and the amount of
the asset loss is recognised in profit or loss in operating expenses. Where a trade debtor is irrecover-
able, it becomes written off against the provisioning account for trade debtors. Amounts previously
written off and thereafter received are recognised as other income.
FINANC
IAL
STATEMEN
TS
Basi
s of
p
re
parati
on and
sum
mary of significant
acco
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pol
icie
s (conti
nued
)