NOTES TO
FINANCIAL STATEMENTS
December 31, 2015
60
CITIC ENVIROTECH LTD.
Annual Report
2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.4 Business combinations (cont’d)
If the initial accounting for a business combination is incomplete by the end of the reporting period
in which the combination occurs, the Group reports provisional amounts for the items for which the
accounting is incomplete. Those provisional amounts are adjusted during the measurement period
(see below), or additional assets or liabilities are recognised, to reflect new information obtained
about facts and circumstances that existed as of the acquisition date that, if known, would have
affected the amounts recognised as of that date.
The measurement period is the period from the date of acquisition to the date the Group obtains
complete information about facts and circumstances that existed as of the acquisition date and is
subject to a maximum of one year from acquisition date.
2.5 Financial instruments
Financial assets and financial liabilities are recognised on the Group’s statement of financial position
when the Group becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that
are directly attributable to the acquisition or issue of financial assets and financial liabilities (other
than financial assets at fair value through profit or loss) are added to or deducted from the fair
value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets at fair value through profit or loss are
recognised immediately in profit or loss.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial instrument
and of allocating interest income or expense over the relevant year. The effective interest rate is the
rate that exactly discounts estimated future cash receipts or payments through the expected life of
the financial instrument, or where appropriate, a shorter period. Income and expense are recognised
on an effective interest basis for debt instruments other than those financial instruments “at fair value
through profit or loss”.
Financial assets
Investments are recognised and de-recognised on a trade date where the purchase or sale of an
investment is under a contract whose terms require delivery of the investment within the time-frame
established by the market concerned, and are initially measured at fair value, net of transaction costs
except for those financial assets classified as at fair value through profit or loss which are initially
measured at fair value.
Other financial assets are classified into the following specified categories: financial assets “at fair
value through profit or loss”, “held-to-maturity investments”, “available-for-sale” financial assets and
“loans and receivables”. The classification depends on the nature and purpose of financial assets and
is determined at the time of initial recognition.
Cash and cash equivalents
Cash and cash equivalents comprise cash and bank balances, demand deposits and other short
term highly liquid assets that are subject to an insignificant risk of changes in value and are readily
convertible to a known amount of cash.
