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BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES CONTINUED¡
(t) Asset impairment
Assets that have an indefinite useful life are tested for impairment annually and when there is indication that they may be
impaired. Assets that are subject to depreciation and amortisation are reviewed for impairment to determine whether there
is any indication that the carrying values of these assets may not be recoverable and have su
ered an impairment loss. If any
such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment
loss, if any. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Such impairment
loss is recognised in income statement except where the asset is carried at valuation and the impairment loss does not
exceed the revaluation surplus for that asset, in which case it is treated as a revaluation decrease and is recognised in other
comprehensive income.
(u) Derivative financial instruments and hedging activities
Derivative financial instruments are utilised by the Group in the management of its interest rate exposures. The Group’s policy
is not to utilise derivative financial instruments for trading or speculative purposes. Derivative financial instruments are initially
measured at fair value on the contract date, and are remeasured to fair value at subsequent reporting dates. Changes in
fair value are recognised based on whether certain qualifying criteria under HKAS 39 are satisfied in order to apply hedge
accounting, and if so, the nature of the items being hedged.
Derivatives designated as hedging instruments to hedge the fair value of recognised assets or liabilities may qualify as fair
value hedges. The Group mainly enters into interest rate swap contracts to swap certain fixed interest rate borrowings into
floating interest rate borrowings. Changes in the fair value of these derivative contracts, together with the changes in the fair
value of the hedged assets or liabilities attributable to the hedged risk are recognised in the income statement. At the same
time the carrying amount of the hedged asset or liability in the statement of financial position is adjusted for the changes in
fair value.
Derivatives that do not qualify for hedge accounting under HKAS 39 will be accounted for with the changes in fair value
being recognised in the income statement.
(v) Pension plans
Pension plans are classified into defined benefit and defined contribution plans.
Pension costs for defined benefit plans are assessed using the projected unit credit method. Under this method, the cost of
providing pensions is charged to income statement so as to spread the regular cost over the future service lives of employees
in accordance with the advice of the actuaries who carry out a valuation of the plans. The pension obligation is measured as
the present value of the estimated future cash outflows using interest rates determined by reference to market yields at the
end of the reporting period based on high quality corporate bonds with currency and term similar to the estimated term of
benefit obligations.
Remeasurements arising from defined benefit plans are recognised in other comprehensive income in the year in which they
occur and reflected immediately in retained profit. Remeasurements comprise actuarial gains and losses, the return on plan
assets (excluding amounts included in net interest on the net defined benefit liability/asset) and any change in the e
ect of
the asset ceiling (excluding amounts included in net interest on the net defined benefit liability/asset).
The contributions to the defined contribution plans are charged to the income statement in the year incurred.
Pension costs are charged against the income statement within sta
costs. The pension plans are generally funded by the
relevant Group companies taking into account the recommendations of independent qualified actuaries and by payments
from employees for contributory plans.
Notes to the
Financial Statements
OPTIMISING FOR THE FUTURE
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