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2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.4 Summary of significant accounting policies (cont’d)
(f) Financial assets (cont’d)
(vi) Derivative instruments and hedge accounting (cont’d)
(b) Hedge accounting
(i) Fair value hedge
For designating and qualifying fair value hedges, the cumulative changes in the fair value of a hedge
derivative is recognised in the statements of income. Meanwhile the cumulative changes in the fair
value of the hedge item attributable to the risk hedged is recorded as part of the carrying value of the
hedge item in the statements of financial position and the statements of income.
If the hedging instruments expired or sold, terminated or exercised or where the hedge no longer
meets the criteria for hedge accounting, the hedge relationship is terminated. For fair value hedges
relating to items carried at amortised cost, any adjustment to carrying value is amortised through profit
or loss over the remaining term of the hedge using the EIR method. EIR amortisation may begin as soon
as an adjustment exists and no later than when the hedged item ceases to be adjusted for changes in
its fair value attributable to the risk being hedged.
If the hedged item is derecognised, the unamortised fair value adjustment is recognised immediately
in the statements of income.
The Bank have interest rate swaps and cross currency interest rate swaps that are used as hedge for the
exposure of changes in the fair value of some of its Medium Term Notes. See Note 10 for more details.
(g) Impairment of financial assets
The Group and the Bank assesses at each reporting date whether there is any objective evidence that a financial
asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be
impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred
after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the
estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant
financial difficulty, the probability that they will enter bankruptcy or other financial reorganisation, default or
delinquency in interest or principal payments and where observable data indicates that there is a measurable
decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate
with defaults.
NOTESTOTHEFINANCIALSTATEMENTS
31 DECEMBER 2013
116
EXIM Bank Annual Report 2013