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Derivative financial instruments
The Group can hold derivative financial
instruments to hedge its foreign currency
and interest rate risk exposures. On initial
designation of the derivative as the hedging
instrument, the Group formally documents
the relationship between the hedging
instrument and the hedged item, including
the risk management objectives and strategy
in undertaking the hedge transaction and the
hedged 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 attributable to hedged risk and whether
the actual results of each hedge are within
a range of 80 - 125 percent. 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 ultimately could
affect reported profit or loss.
Derivatives are recognised initially at fair
value, any attributable transaction costs
are recognised in profit or loss as incurred.
Subsequent to initial recognition, derivatives
are measured at fair value and changes are
recognised in other comprehensive income
and presented in equity, unless ineffective
in which case the ineffective portion is
recognised immediately in profit or loss.
Amounts accumulated in equity are
transferred to the consolidated income
statement in the periods when the hedged
item affects profit or loss (for instance when
the delivery of the goods hedged takes place).
The gain or loss relating to the effective
portion of forward foreign exchange contracts
hedging the imported goods is recognised in
the consolidated income statement within
‘infrastructure maintenance’. However, when
the forecast transaction that is hedged results
in the recognition of a non-financial asset
(for example, inventory or fixed assets) the
gains and losses previously deferred in equity
are transferred from equity and included in
the initial measurement of the cost of the
asset. The deferred amounts are ultimately
recognised in profit or loss as infrastructure
maintenance in the case of goods relating to
maintenance, or as depreciation in the case
of fixed assets.
When a hedging instrument expires or is sold
or terminated, or when a hedge no longer
meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity
at that time remains in equity and is
recognised when the forecast transaction
is ultimately recognised in the consolidated
income statement. When a forecast
transaction is no longer expected to occur,
the cumulative gain or loss that was reported
in equity is immediately transferred to the
consolidated income statement.
(u) Goods and Services Tax
(GST)
Revenues, expenses and assets are
recognised net of the amount of associated
GST, unless the GST incurred is not
recoverable from the taxation authority.
In this case it is recognised as part of the
cost of acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive
of the amount of GST receivable or payable.
The net amount of GST recoverable from,
or payable to, the taxation authority is included
with other receivables or payables in the
consolidated balance sheet.
Cash flows are presented on a gross basis.
The GST components of cash flows arising
from investing or financing activities which
are recoverable from, or payable to the
taxation authority, are presented as
operating cash flows.
NOTE 21 (CONTINUED)
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
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