3 SIGNIFICANT ACCOUNTING POLICIES
(continued)
3.5 Financial instruments
(continued)
Separable embedded derivatives
Changes in the fair value of separable embedded derivatives are recognised immediately
in the Statement of Total Return.
Other non-trading derivatives
When a derivative financial instrument is not designated in a hedge relationship that
qualifies for hedge accounting, all changes in its fair value are recognised immediately in
Statement of Total Return.
Convertible bonds
The Group has issued convertible bonds that comprise a liability for the principal and
interest amount and a derivative liability. The derivative liability is recognised at fair value
at inception. The carrying amount of the convertible bonds at initial recognition is the
difference between the gross proceeds from the convertible bonds issued and the fair
value of the derivative liability. Any directly attributable transaction costs are allocated to
the convertible bonds and derivative liability in proportion to their initial carrying amounts.
Subsequent to initial recognition, the convertible bonds are measured at amortised cost
using effective interest method. The derivative liability is measured at fair value through
profit or loss.
The Group has also issued convertible bonds that can be converted into Unitholders’
funds at the option of the holder, where the number of units to be issued does not vary with
changes in their fair value are accounted for as compound financial instruments. The
gross proceeds are allocated to the equity and liability components, with the equity
component being assigned the residual amount after deducting the fair value of the
liability component from the fair value of the compound financial instrument. Subsequent
to initial recognition, the liability component of convertible bonds is measured at
amortised cost using the effective interest method. The equity component of convertible
bonds is not re-measured subsequent to initial recognition.
3.6 Impairment
Non-derivative financial assets
A financial asset not carried at fair value through profit or loss is assessed at each
reporting date to determine whether there is objective evidence that it is impaired. A
financial asset is impaired if objective evidence indicates that a loss event has occurred
after the initial recognition of the asset, and that the loss event had a negative effect on
the estimated future cash flows of that asset that can be estimated reliably.
Objective evidence that financial assets are impaired can include default or delinquency
by a debtor, restructuring of an amount due to the Group on terms that the Group would
not consider otherwise, indications that a debtor or issuer will enter bankruptcy. In
addition, for an investment in an equity security, a significant or prolonged decline in its
fair value below its cost is objective evidence of impairment.
The Group considers evidence of impairment for loans and receivables at both a specific
asset and collective level. All individually significant loans and receivables are assessed
for specific impairment. All individually significant loans and receivables found not to be
specifically impaired are then collectively assessed for any impairment that has been
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