Page 45 - AOB 2018 (ENG)

Audit
Oversight
Board
ANNUAL
REPORT
2018

A financial liability or a part of it is derecognised when, and only when, the obligation
specified in the contract is discharged, cancelled or expires. A financial liability is also
derecognised when its terms are modified and the cash flows of the modified liability are
substantially different, in which case, a new financial liability based on modified terms is
recognised at fair value. On derecognition of a financial liability, the difference between
the carrying amount of the financial liability extinguished or transferred to another
party and the consideration paid, including any non-cash assets transferred or liabilities
assumed, is recognised in profit or loss.

(iv) Off setting

Financial assets and financial liabilities are offset and the net amount presented in the
statement of financial position when, and only when, the AOB currently has a legally
enforceable right to set off the amounts and it intends either to settle them on a net basis
or to realise the asset and liability simultaneously.

(b) Cash and cash equivalents

Cash and cash equivalents consist of balances and deposits with banks which have an insignificant
risk of changes in fair value with original maturities of three months or less, and are used by the
AOB in the management of their short term commitments. For the purpose of the statement of
cash flows, cash and cash equivalents are presented net of restricted deposits, if any.

(c) Impairment

Financial assets

Unless specifically disclosed below, the AOB generally applied the following accounting policies
retrospectively. Nevertheless, as permitted by MFRS 9, Financial Instruments, the AOB elected
not to restate the comparatives.

Current financial year

The AOB recognises loss allowances for expected credit losses on financial assets measured at
amortised cost. Expected credit losses are a probability-weighted estimate of credit losses.

The AOB measures loss allowances at an amount equal to lifetime expected credit loss, except
for cash and cash equivalents for which credit risk has not increased significantly since initial
recognition, which are measured at 12-month expected credit loss.

When determining whether the credit risk of a financial asset has increased significantly since
initial recognition and when estimating expected credit loss, the AOB considers reasonable and
supportable information that is relevant and available without undue cost or effort. This includes
both quantitative and qualitative information and analysis, based on the AOB’s historical
experience and informed credit assessment and including forward-looking information, where
available.

PART TWO STATEMENTS | 43

T_2018 AOB AR PART 2.indd 43 10/04/2019 5:11 PM