Page 43 - AOB 2018 (ENG)

Audit
Oversight
Board
ANNUAL
REPORT
2018

Current financial year

A financial asset or a financial liability is initially measured at fair value plus or minus,
for an item not at fair value through profit or loss, transaction costs that are directly
attributable to its acquisition or issuance.

An embedded derivative is recognised separately from host contract where the host
contract is not a financial asset, and accounted for separately if, and only if the derivative
is not closely measured at fair value through profit or loss. The host contract, in the event
an embedded derivative is recognised separately, is accounted for in accordance with
policy applicable to the nature of the host.

Previous financial year

Financial instrument was recognised initially, at its fair value plus or minus, in the case of
a financial instrument not at fair value through profit or loss, transaction costs that were
directly attributable to the acquisition or issue of the financial instrument.

An embedded derivative was recognised separately from the host contract and accounted
for as a derivative if, and only if, it was not closely related to the economic characteristics
and risks of the host contract and the host contract was not recognised as fair value
through profit or loss. The host contract, in the event an embedded derivative was
recognised separately, was accounted for in accordance with policy applicable to the
nature of the host contract.

(ii) Financial instrument categories and subsequent measurement

Financial assets

Current financial year

Categories of financial assets are determined on initial recognition and are not reclassified
subsequent to their initial recognition unless the AOB changes its business model for
managing financial assets in which case all affected financial assets are reclassified on the
first day of the first reporting period following the change of the business model.

Amortised cost

Amortised cost category comprises financial assets that are held within a business model
whose objective is to hold assets to collect contractual cash flows and its contractual
terms give rise on specified dates to cash flows that are solely for payments of principal
and interest on the principal amount outstanding. The financial assets are not designated
as fair value through profit or loss. Subsequent to initial recognition, these financial assets
are measured at amortised cost using the effective interest method. The amortised cost is
reduced by impairment losses. Interest income and impairment are recognised in profit or
loss. Any gain or loss on derecognition is recognised in profit or loss.

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