Tiger Brands Integrated Annual Report 2014

ANNUAL FINANCIAL STATEMENTS

Notes to the financial statements

continued

for the year ended 30 September 2014

150

Tiger Brands Limited Integrated Annual Report

2014

An analysis of fair values of financial instruments and

further details as to how they are measured are

provided in note 37.

Impairment of financial assets

The group assesses at each reporting date whether

there is objective evidence indicating that a financial

asset, or group of financial assets, is impaired.

Available-for-sale financial assets

In the case of equity investments classified as

available for sale, objective evidence would include

a significant or prolonged decline in the fair value of

the investment below its cost. “Significant” is to be

evaluated against the original cost of the investment

and “prolonged” against the period in which the

fair value has been below its original cost. Factors

taken into consideration would include external

market and economic outlook reports, observable

trends and cyclicality.

If an available-for-sale asset is impaired, the amount

transferred from other comprehensive income to profit

or loss is:

the difference between the asset’s acquisition cost

(net of any principal payments and amortisation);

and

its current fair value, less any impairment loss

previously recognised in profit or loss.

Reversals in respect of equity instruments classified as

available for sale are not recognised in profit or loss.

Reversals of impairment losses on debt instruments

are reversed through profit or loss if the increase in

fair value of the instrument can be objectively related

to an event occurring after the impairment loss was

recognised in profit or loss.

Assets carried at amortised cost

If there is objective evidence that an impairment

loss has been incurred, the amount of the loss is

measured as the difference between the asset’s

carrying amount and the present value of the

estimated future cash flows (excluding future expected

credit losses) discounted at the asset’s original

effective interest rate.

The group assesses whether there is objective

evidence of impairment individually for financial assets

that are individually significant, and individually or

collectively for financial assets that are not individually

significant. In relation to trade receivables, a provision

for impairment is made when there is objective

evidence (such as the probability of insolvency or

significant financial difficulties of the debtor) that the

group will not be able to collect all of the amounts

due under the original terms of the sale. The carrying

amount of the asset is reduced through the use of an

allowance account, and is recognised in profit or loss.

Impaired debts are derecognised when they are

assessed as uncollectible.

If, in a subsequent period, the amount of the

impairment decreases and the decrease relates

objectively to an event occurring after the

impairment, it is reversed to the extent that the

carrying value does not exceed the amortised cost.

Any subsequent reversal of an impairment loss is

recognised in profit or loss.

Held-to-maturity financial investments

For held-to-maturity investments the group assesses

individually whether there is objective evidence of

impairment such as significant financial difficulty

of the issuer. If there is objective evidence that an

impairment loss has been incurred, the amount of

the loss is measured as the difference between the

asset’s carrying amount and the present value of

estimated future cash flows. The carrying amount

of the asset is reduced and the amount of the loss

is recognised in profit or loss.

If, in a subsequent year, the amount of the estimated

impairment loss decreases because of an event

occurring after the impairment was recognised, any

amounts formerly charged are credited to profit or loss.

Derivative instruments

Derivatives are financial instruments which value

changes in response to an underlying factor, require

little or no net investment and are settled at a future

date. Derivatives, other than those arising on

designated hedges, are measured at fair value with

changes in fair value being recognised in profit or loss.