NOTES TO
FINANCIAL STATEMENTS
December 31, 2015
61
CITIC ENVIROTECH LTD.
Annual
Report
2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.5 Financial instruments (cont’d)
Financial assets (cont’d)
Loans and receivables
Trade receivables, service concession receivables and other receivables that have fixed or
determinable payments that are not quoted in an active market are classified as “loans and
receivables”. Loans and receivables are measured at amortised cost using the effective interest
method less impairment. Interest is recognised by applying the effective interest method, except for
short-term receivables when the effect of discounting is immaterial.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at the end of each reporting period.
Financial assets are impaired where there is objective evidence that, as a result of one or more events
that occurred after the initial recognition of the financial asset, the estimated future cash flows of the
financial asset have been impacted.
For financial assets carried at amortised cost, the amount of the impairment is the difference
between the asset’s carrying amount and the present value of estimated future cash flows,
discounted at the original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial
assets with the exception of receivables where the carrying amount is reduced through the use of an
allowance account. When a receivable is uncollectible, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited against the allowance account.
Changes in the carrying amount of the allowance account are recognised in profit or loss.
With the exception of available-for-sale equity instruments, if, in a subsequent period, the
amount of the impairment loss decreases and the decrease can be related objectively to an event
occurring after the impairment loss was recognised, the previously recognised impairment loss is
reversed through profit or loss to the extent the carrying amount of the financial asset at the date
the impairment is reversed does not exceed what the amortised cost would have been had the
impairment not been recognised.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the
asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership
of the asset to another entity. If the Group neither transfers nor retains substantially all the risks
and rewards of ownership and continues to control the transferred asset, the Group recognises its
retained interest in the asset and an associated liability for amounts it may have to pay if the Group
retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group
continues to recognise the financial asset and also recognises a collateralised borrowing for the
proceeds received.
