For securities traded in an active market, fair value is determined by reference to quoted mid-market prices at the current reporting
date. For securities traded in a market that is not active, valuation techniques are used based on market observable inputs. In a
limited number of instances, valuation techniques are based on non-market observable inputs. The fair value of investments in
unlisted managed investment schemes is determined on the basis of published redemption prices of those managed investment
schemes at the reporting date.
Investment revenue is brought to account on an accruals basis. Revenue on investments in equity securities and property trusts is
deemed to accrue on the date the dividends/distributions are declared, which for listed equity securities is deemed to be the ex-
dividend date.
O. INVESTMENT IN SUBSIDIARIES
Investment in subsidiaries is initially recognised at cost (fair value of consideration provided plus directly attributable costs) and is
subsequently carried at the lower of cost and recoverable amount by the Parent entity. Costs incurred in investigating and evaluating
an acquisition up to the point of formal commitment to an acquisition are expensed as incurred. Where the carrying value exceeds the
recoverable amount, an impairment charge is recognised in profit or loss which can subsequently be reversed in certain conditions.
Where an additional interest is purchased in an existing subsidiary, the acquisition is treated as a transaction between owners and has
no impact on the statement of comprehensive income. Income from these investments, comprising dividends and trust distributions,
is brought to account on an accruals basis. Dividend revenue is accrued on the date the dividends are declared.
P. INVESTMENT IN JOINT VENTURES AND ASSOCIATES
Investment in joint arrangements and associates is initially recognised at cost (fair value of consideration provided plus directly
attributable costs) by the entity holding the ownership interest, including attributed goodwill, and is subsequently carried in the entity’s
financial statements at the lower of cost and recoverable amount.
Q. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand available on demand and deposits held at call with financial institutions. Cash and
cash equivalents are measured at fair value, being the principal amount. For the purpose of the cash flow statement, cash also
includes other highly liquid investments not subject to significant risk of change in value, with short periods to maturity, net of any
bank overdraft.
R. DERIVATIVES
The Group uses a variety of derivatives to manage various risks. Derivatives are used solely to manage risk exposure and are not used
for trading or speculation.
I. Derivatives without hedge accounting applied
Derivatives are initially recognised at trade date at fair value excluding transaction costs. The fair value is determined by reference to
current market quotes or generally accepted valuation principles.
Transaction costs for purchases of derivatives are expensed as incurred.
For derivatives that do not qualify for hedge accounting, the changes in fair value are immediately recognised in profit or loss. The
derivatives in relation to the investment operations are presented together with the underlying investments, or as payables when the
fair value is negative. The derivatives in relation to corporate treasury transactions are presented as receivables when the fair value is
positive, or as payables when the fair value is negative.
Where derivatives qualify for hedge accounting, the treatment is set out in section II.
II. Hedge accounting
Hedge accounting may be applied to derivatives designated as hedging instruments provided certain criteria are met. Certain
transactions have been designated as the following:
Fair value hedge: hedge of a change in fair value of an asset or liability or an unrecognised firm commitment; or
Cash flow hedge: hedge of the exposure to the variability of cash flow attributable to a particular risk associated with a recognised
asset or liability, or an unrecognised firm commitment; or
Net investment hedge: hedge of a net investment in a foreign operation.
To qualify for hedge accounting, at the inception of the hedge and throughout its life, each hedge must be expected to be highly
effective. Actual effectiveness in the range of 80% to 125% must also be demonstrated on an ongoing basis. When it is determined
that a derivative for which hedge accounting has been designated is not (or ceases to be) effective, hedge accounting is discontinued
prospectively from the date of ineffectiveness.
a. FAIR VALUE HEDGE
Changes in the fair value of the hedging instrument are recognised in profit or loss, together with changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk.
b. CASH FLOW HEDGE
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in
reserves as part of equity. Any gain or loss relating to an ineffective portion is immediately recognised in profit or loss.
47
