PSA International Pte Ltd Annual Report 2010
N otes to the Financial Statements
Year ended 31 December 2010
Available-for-sale financial assets
The Group’s investments in equity securities and debt securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than for impairment losses (see note 2.8) and foreign exchange gains and losses on available-for-sale debt instruments, are recognised in other comprehensive income and presented within equity in the fair value reserve. When the financial asset is derecognised, the cumulative gain or loss in fair value reserve is transferred to the income statement.
Impairment of financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.
An impairment loss in respect of loans and receivables and held-to-maturity investments is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its current fair value.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in the income statement. Any cumulative loss in respect of an available-for-sale financial asset recognised previously in fair value reserve is transferred to the income statement.
Impairment losses for loans and receivables, held-to-maturity investments and available-for-sale financial assets that are debt securities are reversed if the subsequent increase in fair value can be related objectively to an event occurring after the impairment loss was recognised. Impairment losses once recognised in the income statement in respect of available- for-sale financial assets that are equity securities are not reversed through the income statement. Any subsequent increase in fair value of such assets is recognised directly in fair value reserve.
Intra-group financial guarantees
Financial guarantee contracts are accounted for as insurance contracts. A provision is recognised based on the Company’s estimate of the ultimate cost of settling all claims incurred but unpaid at the reporting date. The provision is assessed by reviewing individual claims and tested for adequacy by comparing the amount recognised and the amount that would be required to settle the guarantee contract.
When entities within the Group are lessees of a finance lease
Leased assets in which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Leased assets are depreciated over the shorter of the lease term and their useful lives. Lease payments are apportioned between finance expense and reduction of the lease liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.