Page 76 - TreasuryChinaTrust2011

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Notes to the Financial Statements
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) Financial instruments (Continued)
(ii) Non-derivative financial liabilities (Continued)
Financial assets and liabilities are offset and the net amount presented in the Statement of Financial
Position 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) Compound financial instruments
Compound financial instruments issued by the Group comprise convertible bonds denominated in
Singapore Dollars and convertible notes denominated in Chinese RMB, which are different from the
functional currency of the Trust. These convertible debt instruments can be converted to units of the
Trust at the option of the holder, where the number of units to be issued does not vary with changes in
their fair value.
Convertible debts denominated in the functional currency of the Trust
The liability component of a compound financial instrument is recognised initially at the fair value of a
similar liability that does not have an equity conversion option. The equity component is recognised
initially at the difference between the fair value of the compound financial instrument as a whole and the
fair value of the liability component. Any directly attributable transaction costs are allocated to the liability
and equity components in proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured
at amortised cost using the effective interest method. The equity component of a compound financial
instrument is not remeasured subsequent to initial recognition. Interest and gains and losses related to
the financial liability are recognised in profit or loss. On conversion, the financial liability is reclassified to
equity; no gain or loss is recognised on conversion.
Foreign currency convertible debts
On issuance of foreign currency convertible debts, the proceeds are allocated between the embedded
equity conversion option and the liability component. The embedded option is recognised at its fair value.
The liability component is recognised as the difference between total proceeds and the fair value of the
equity conversion option.
The equity conversion option is subsequently carried at its fair value with fair value changes recognised
in profit or loss. The liability component is carried at amortised cost until the liability is extinguished on
conversion or redemption. When an equity conversion option is exercised, the carrying amounts of the
liability component and the equity conversion option are derecognised with a corresponding recognition
of units in issue.
SAR1112034_TCT_AR_().indb 74 3/23/2012