Page 36 - TreasuryChinaTrust

Treasury China Trust Annual Report 2010 61

NOTES TO THE FINANCIAL STATEMENTS

Period from 19 May 2010 (date of constitution) to 31 December 2010

3 Summary of significant accounting policies (Continued)

(e) Financial instruments (Continued)

(i) Non-derivative financial assets (Continued)

Financial assets and liabilities are offset and the net amount presented in the balance sheet when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group has the following non-derivative financial assets: available-for-sale financial assets and loans and receivables.

Available- for-sale financial assets

Investment in equity security is classified as available-for-sale financial asset. Subsequent to initial recognition, it is measured at fair value and changes therein, other than impairment losses, and foreign currency differences on available-for-sale debt instruments, are recognised in other comprehensive income and presented in the fair value reserve in equity. Investment in unquoted equity securities that do not have a quoted market price or whose fair value cannot be reliably measured shall be measured at cost less impairment losses. When the investment is derecognised, the cumulative gain or loss in equity is transferred to profit or loss.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

Cash and cash equivalents comprise cash balances and bank deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(ii) Non-derivative financial liabilities

The Group initially recognises debt securities issued on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

Financial assets and liabilities are offset and the net amount presented in the balance sheet when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.

(iii) Unitholders’ funds

Unitholders’ funds represent the Unitholders’ share of all net cash proceeds derived from the realisation of the assets of the Trust less any liabilities upon termination and are classified as equity. Incremental costs directly attributable to the issue of units are recognised as a deduction from equity, net of any tax effects.