128 CapitaLand Integrated Commercial Trust Notes to the financial statements Year ended 31 December 2024 3 MATERIAL ACCOUNTING POLICIES (continued) 3.5 Financial instruments (continued) (vi) Derivative financial instruments and hedge accounting (continued) Net investment hedges The Group designates certain derivatives and non-derivative financial liabilities as hedges of foreign exchange risk on a net investment in a foreign operation. When a derivative instrument or a non-derivative financial liability is designated as the hedging instrument in a hedge of a net investment in a foreign operation, the effective portion of changes in the fair value of the derivative or foreign exchange gains and losses for a non-derivative is recognised in the Statement of Movements in Unitholders’ Funds and presented in the foreign currency translation reserve within Unitholders’ Funds. Any ineffective portion of the changes in the fair value of the derivative or foreign exchange gains and losses on the non-derivative is recognised immediately in the Statement of Total Return. The amount recognised in Unitholders’ Funds is reclassified to the Statement of Total Return as a reclassification adjustment on disposal of the foreign operation. 3.6 Impairment Non-derivative financial assets The Group recognises loss allowances for expected credit loss (“ECLs”) on financial assets measured at amortised cost. Loss allowances of the Group are measured on either of the following bases: • 12-month ECLs: these are ECLs that result from default events that are possible within the 12 months after the reporting date (or for shorter period if the expected life of the instrument is less than 12 months); or • Lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument. Simplified approach The Group applies the simplified approach to provide for ECLs for all trade receivables. The simplified approach requires the loss allowance to be measured at an amount equal to lifetime ECLs. General approach The Group applies the general approach to provide for ECLs on all other financial instruments. Under the general approach, the loss allowance is measured at an amount equal to 12-month ECLs at initial recognition. At each reporting date, the Group assesses whether the credit risk of a financial instrument has increased significantly since initial recognition. When credit risk has increased significantly since initial recognition, loss allowance is measured at an amount equal to lifetime ECLs. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group 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 Group’s historical experience and informed credit assessment and includes forward-looking information. If credit risk has not increased significantly since initial recognition or if the credit quality of the financial instruments improve such that there is no longer a significant increase in credit risk since initial recognition, loss allowance is measured at an amount equal to 12-month ECLs.
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