PSA International Pte Ltd Annual Report 2010
N otes to the Financial Statements
Year ended 31 December 2010
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in other comprehensive income and presented within equity in the hedging reserve remains there until the forecast transaction occurs. When the hedged item is a non-financial asset, the amount recognised in other comprehensive income is transferred to the carrying amount of the asset when it is recognised. In other cases, the amount recognised in other comprehensive income is transferred to the income statement in the same period that the hedged item affects the income statement.
Fair value hedges
Changes in the fair value of a derivative designated as a hedging instrument of a fair value hedge are recognised in the income statement. The hedged item is also stated at fair value in respect of the risk being hedged; the gain or loss attributable to the hedged risk is recognised in the income statement and the carrying amount of the hedged item is adjusted.
Hedge of net investment in a foreign operation
Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognised in the Company’s income statement. On consolidation, such differences are recognised as other comprehensive income and presented within equity in the foreign currency translation reserve, to the extent that the hedge is effective. The ineffective foreign currency differences are recognised in the income statement.
If the hedging instrument no longer meets the criteria for hedge accounting, hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in foreign currency translation reserve is transferred to the income statement as an adjustment to the gain or loss on disposal when the investment in the foreign operation is disposed.
Hedge accounting is not applied to derivative instruments that economically hedge monetary assets and liabilities denominated in foreign currencies. Changes in the fair value of such derivatives are recognised in the income statement as part of foreign currency gains and losses.
Separable embedded derivatives
Changes in the fair value of separable embedded derivatives are recognised immediately in the income statement.
Defined contribution plans
Obligations for contributions to post-employment benefits and employees’ retirement gratuities under defined contribution plans are recognised as an expense in the income statement as incurred.
Defined benefit obligations
The Group’s net obligations in respect of defined benefit pension and healthcare plans and unfunded defined benefit employees’ leaving entitlements are calculated separately for each defined benefit plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine the present value, and the fair value of any plan assets is deducted. The calculation is performed by a qualified actuary every year using the projected unit credit method.