Page 50 - Bauxite Resources Annual Report 2014

48 | Bauxite Resources Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTS
Notes to the Financial Statements cont.
Annual Report 2014 Bauxite Resources 48
(k) Investments and other financial assets
Classification
The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and
receivables, held-to-maturity investments and available-for-sale financial assets. The classification depends on the purpose for
which the investments were acquired. Management determines the classification of its investments at initial recognition and, in
the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date.
(i) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this
category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless
they are designated as hedges. Assets in this category are classified as current assets.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet
date which are classified as non-current assets. Loans and receivables are included in trade and other receivables in the
balance sheet.
Collectability of loans and receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off
by reducing the carrying amount directly. An allowance account (provision for impairment) is used when there is objective
evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables or in an
otherwise timely manner. The amount of the impairment allowance is the difference between the asset’s carrying amount and
the estimated future cash flows. None of the Group’s loans and receivables has an applicable interest rate hence the cash flows
are not discounted.
The amount of the impairment loss is recognised in the income statement within impairment expenses. When a loan or
receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written
off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses
in the income statement.
(iii) Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that
the Group’s management has the positive intention and ability to hold to maturity. If the Group were to sell other than an
insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified as available-for-
sale. Held-to-maturity financial assets are included in non-current assets, except for those with maturities less than 12 months
from the reporting date, which are classified as current assets.
(iv) Available-for-sale financial assets
Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either
designated in this category or not classified in any of the other categories. They are included in non-current assets unless
management intends to dispose of the investment within 12 months of the balance sheet date. Investments are designated
available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them
for the medium to long term.
Recognition and de-recognition
Regular purchases and sales of financial assets are recognised on trade-date – the date on which the Group commits to
purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not
carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair
value and transaction costs are expensed to the income statement. Financial assets are derecognised when the rights to receive
cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the
risks and rewards of ownership.
When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in equity are
included in the income statement as gains and losses from investment securities.