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CapitaLand Mall Trust
Annual Report 2015
3 Significant accounting policies
(continued)
3.5 Financial instruments
(continued)
Derivative financial instruments and hedging activities
(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.
3.6 Impairment
Non-derivative financial assets
A financial asset not carried at fair value through profit or loss, including an interest in an associate, subsidiary
and joint venture, 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 has an impact 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 incurred but not yet identified. Loans and receivables that are not individually
significant are collectively assessed for impairment by grouping together loans and receivables with similar
risk characteristics.
In assessing collective impairment, the Group uses historical trends of the probability of default, timing of
recoveries and the amount of loss incurred, adjusted for the Manager’s judgement as to whether current
economic and credit conditions are such that the actual losses are likely to be greater or less than suggested
by historical trends.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s
original effective interest rate. Losses are recognised in the Statement of Total Return and reflected in an
allowance account against loans and receivables. Interest on the impaired asset continues to be recognised
through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to
decrease, the decrease in impairment loss is reversed through the Statement of Total Return.
An impairment loss in respect of a subsidiary, associate or joint venture is measured by comparing the
recoverable amount of the investment with its carrying amount in accordance with the paragraph below.
An impairment loss is recognised in the Statement of Total Return. An impairment loss is reversed if there has
been a favourable change in the estimates used to determine the recoverable amount.
Notes to the Financial Statements
Year ended 31 December 2015
