Investment property is property held either to earn rental
income or for capital appreciation or for both, but not for sale in
the ordinary course of business, used in the production or supply
of goods or services or for administrative purposes. Investment
property comprises freehold land, freehold buildings and land held
under operating leases. Investment property is initially recognised
on completion of contracts at cost, including related transaction
and borrowing costs associated with the investment property.
Borrowing costs incurred for the purpose of acquiring, constructing
or producing a qualifying investment property are capitalised as
part of its costs.
Borrowing costs are capitalised while acquisition or
construction is actively underway and cease once the asset is
substantially completed, or suspended if the development of the
asset is suspended.
Where unconditional commitments have been entered into prior to
the consolidated statement of financial position date, property
acquisitions are recognised at their contractual value. After
initial recognition, investment properties are measured at fair
value as determined by third party independent appraisers. The
gains or losses arising from a change in the fair value of the
investment property are included in the consolidated income
statement under the heading "net valuation gains / (losses) on
investment property" in the period in which they arise.
Depreciation is not provided on investment properties. Realised net
gains and losses on the disposal of investment properties are
determined as the difference between the disposal proceeds and the
carrying value and are included in the consolidated income
statement in the period in which they arise.
A property interest under an operating lease is classified and
accounted for as an investment property on a property-by-property
basis when the Group holds it to earn income or for capital
appreciation or both. Any such property interest under an operating
lease classified as an investment property is carried at fair
value. This accounting policy is also applied for assets held for
sale (note 30).
3.5 Financial instruments
Financial assets: Initial recognition
The Group determines the classification of its financial assets
at initial recognition.
The Group's financial assets include cash and short term
deposits, trade and other receivables and financial
instruments.
Financial liabilities: Initial recognition
Financial liabilities within the scope of IAS 39 are classified
as either financial liability at fair value through profit and
loss, loans and borrowings, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate. The Company
determines the classification of its financial liabilities at
initial recognition.
The Group's financial liabilities include trade and other
payables, loans and borrowings and derivative financial
instruments.
The subsequent measurement of financial liabilities depends on
their classification:
- Financial liability at fair value recognised through profit and loss
Financial liability at fair value recognised through profit and
loss includes financial liabilities held for trading and financial
liabilities designated upon the initial recognition at fair value
through profit and loss. Financial liabilities are classified as
held for trading if they are acquired for the purpose of selling in
the near term. This category includes derivative instruments
entered into by the Group that do not meet hedging accounting
criteria as defined by IAS 39. Gains and losses on liabilities held
for trading are recognised in the consolidated income
statement;
- Fair value of financial instruments
The fair value of financial instruments that are actively traded
in organised financial markets is determined by reference to quoted
market bid prices at the close of business on the consolidated
statement of financial position date. For financial instruments
where there is no active market, fair value is determined using
valuation techniques. Such techniques may include recent arm's
length market transactions; reference to the current fair value of
another instrument that has substantially the same discounted cash
flow analysis or other valuation methods;
- Amortised cost of financial instruments
Amortised cost is computed using the effective interest rate
method less any allowance for impairment and principal repayment or
reduction. The calculation takes into account any premium or
discount on acquisition and includes transaction costs and fees
that are an integral part of the effective interest rate.
3.6 Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments to hedge its
exposure to interest rate risks arising from operational, financing
and investment activities (refer to note 28). On initial
designation of the hedge, the Group formally documents the
relationship between the hedging instruments and hedged items,
including the risk management objectives and strategy in
undertaking the hedge transaction, together with the methods that
will be used to assess the effectiveness of the hedge relationship.
The Group makes an assessment, both at the inception of the hedge
relationship as well as on an ongoing basis, whether the hedging
instruments are expected to be "highly effective" in offsetting the
changes in the fair value of cash flows of the respective hedged
items during the period for which the hedge is designated, and
whether the actual results of each hedge are within a range of
80-125%.
Derivatives are initially recognised at fair value with related
transaction costs recognised in the consolidated income statement
when incurred. Subsequent to initial recognition, derivative
financial instruments are measured and stated at fair value on the
date on which the derivative contract is entered into and are
subsequently revised to reflect their fair value. Derivatives are
carried as financial assets when the fair value is positive and as
financial liabilities when the fair value is negative. Any gains or
losses arising from changes in fair value on derivatives during the
year that do not qualify for hedge accounting and the ineffective
portion of an effective hedge are taken directly to the
consolidated income statement. The effectiveness of the hedge is
assessed by comparing the value of the hedged item with the
notional value implicit in the contractual terms of the financial
instrument being used in the hedge.
The fair value of interest rate cap contracts is determined by
reference to market values for similar instruments.
For the purpose of hedge accounting, hedges are classified as
either fair value hedges, when they hedge the exposure to changes
in the fair value of a recognised asset and liability, or cash flow
hedges where they hedge exposure to variability in cash flows
attributable to a particular risk associated with a recognised
asset or liability.
Cash flow hedges
Changes in the fair value of the derivative hedging instrument
designated as a cash flow hedge are recognised directly in equity
to the extent that the hedge is effective. To the extent that the
hedge is ineffective, changes in fair value are recognised in the
consolidated income statement.
Amounts taken to equity are transferred to the consolidated
income statement when the hedged transaction affects profit or
loss, such as when the hedged financial income or financial expense
is recognised or when the related sale occurs.
If the hedging instrument no longer meets the criteria for hedge
accounting, expires or is sold, terminated or exercised, then hedge
accounting is discontinued prospectively. The cumulative gain or
loss previously recognised in equity remains there until the
forecast transaction occurs. When the hedged item is a
non-financial asset, the amount recognised in equity is transferred
to the carrying amount of the asset when it is recognised. In other
cases the amount recognised in equity is transferred to the
consolidated income statement in the same period that the hedged
item affects profit or loss.
3.7 Impairment
Financial assets (including receivables)
The Group assesses at consolidated statement of financial
position date whether there is any objective evidence that a
financial asset is impaired. A financial asset is deemed to be
impaired if, and only if, there is objective evidence of an
impairment as a result of one or more events that has occurred
after the initial recognition of the asset (an incurred "loss
event") and that loss event has an impact on the estimated future
cash flows of the financial asset that can be reliably estimated.
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
consolidated income statement.
An impairment loss in respect of a financial asset measured at
amortised cost 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. Losses are
recognised in the consolidated income statement in an allowance
account against loans and receivables.
Non-financial assets
The carrying amounts of the Group's non financial assets are
reviewed at each reporting date to determine whether there is any
indication of impairment. For the purpose of impairment testing,
assets are grouped together into the smallest group of assets that
generates continuing cash flows that are largely independent of the
cash flows of other assets or groups of assets (the
"cash-generating unit").
An impairment loss is recognised if the carrying amount of an
asset or its cash-generating unit exceeds its estimated recoverable
amount. Impairment losses are recognised in the consolidated income
statement.
3.8 Derecognition of financial instruments
Financial assets
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