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2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.4 Summary of significant accounting policies (cont’d)
(f) Financial assets (cont’d)
(v) Financial assets at fair value through profit or loss
A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired.
On derecognition of a financial asset in its entirely, the difference between the carrying amount and the sum of
the consideration received and any cumulative gain or loss that had been recognised in other comprehensive
income is recognised in statements of income.
Regular way purchases or sales of financial assets that require delivery of assets within the period generally
established by regulation or convention in the marketplace concerned. All regular way purchases and sales
of financial assets are recognised or derecognised on the trade date i.e, the date that the Group and the Bank
commit to purchase or sell the asset.
(vi) Derivative instruments and hedge accounting
(a) Derivative instruments
The Group and the Bank use derivatives such as interest rate swaps, cross currency interest rate swaps and
forward contract. Such derivative financial instruments are initially recognised at fair value on the date on
which a derivative contract is entered into and subsequently re-measured at fair value. These derivatives
are recorded at fair value and are carried as financial assets when the fair value is positive and as financial
liabilities when the fair value is negative. Any gains or losses arising from changes in the fair value of
derivatives are taken directly to profit or loss as “Other income”.
(b) Hedge accounting
The Group and the Bank use derivatives instrument to manage their exposures to interest rate, foreign
currency and credit risks. In order to manage particular risk, the Group and the Bank apply hedge accounting
for transactions which meet specified criteria.
At the inception of each hedge relationship, the Group and the Bank formally designates and documents
the relationship between the hedged item and the hedging instruments, including the nature of the risk,
the risk management objective and strategy for undertaking the hedge and the method that will be used to
assess the effectiveness of the hedging relationship at inception and ongoing basis.
At each hedge effectiveness assessment date, a hedge relationship must demonstrate that it is highly
effective on prospective and retrospective basis for the designated period in order to qualify for
hedge accounting.
EXIM Bank Annual Report 2013
115