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CapitaLand Mall Trust
Annual Report 2015
Overview
Sustainability
Business
Review
Portfolio
Details
Corporate
Governance &
Transparency
Financials &
Additional
Information
3 Significant accounting policies
(continued)
3.5 Financial instruments
(continued)
Non-derivative financial liabilities
The Group initially recognises debt securities issued on the date that they are originated. All other financial
liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade
date at which the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.
The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial
liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to
initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.
Other financial liabilities comprise interest-bearing borrowings, trade and other payables and security deposits.
Derivative financial instruments and hedging activities
The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures.
Embedded derivatives are separated from the host contract and accounted for separately if the economic
characteristics and risks of the host contract and the embedded derivative are not closely related, a separate
instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the
combined instrument is not measured at fair value through profit or loss. Multiple embedded derivatives in a
single instrument are treated as a single compound embedded derivative if they share the same underlying
risk exposures, are interdependent of each other and are not readily separable.
On initial designation of the hedge, the Group formally documents the relationship between the hedging
instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the
hedge transaction and the hedge risk, together with the methods that will be used to assess the effectiveness
of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship
as well as on an ongoing basis, of whether the hedging instruments are expected to be “highly effective” in
offsetting the changes in the fair value or cash flows of the respective hedged items during the period for
which the hedge is designated, and whether the actual results of each hedge are within a range of 80%-125%.
For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should
present an exposure to variations in cash flows that could ultimately affect reported Statement of Total Return.
Derivatives are recognised initially at fair value; attributable transaction costs are recognised in the Statement
of Total Return when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and
changes therein are accounted for as described below.
Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable
to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction
that could affect Statement of Total Return, the effective portion of changes in the fair value of the derivative
is recognised in Unitholders’ funds and presented in the hedging reserve in equity. Any ineffective portion of
changes in the fair value of the derivative is recognised immediately in Statement of Total Return.
When the hedged item is a non-financial asset, the amount accumulated in Unitholders’ funds is included
in the carrying amount of the asset when the asset is recognised. In other cases, the amount accumulated
in Unitholders’ funds is reclassified to Statement of Total Return in the same period that the hedged item
affects Statement of Total Return. If the hedging instrument no longer meets the criteria for hedge accounting,
expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued
prospectively. If the forecast transaction is no longer expected to occur, then the balance in Unitholders’ funds
is reclassified to Statement of Total Return.
