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CIMIC Group Limited Annual Report 2016 |
Financial Report
Notes to the Consolidated Financial Statements continued
for the 12 months to 31 December 2016
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONTINUED
f) Derivative financial instruments
Derivative financial instruments are stated at fair value, with changes in fair value recognised in the statement of profit or loss. Where
derivative financial instruments qualify for hedge accounting, recognition of changes in fair value depends on the nature of the item being
hedged. Hedge accounting is discontinued when the hedging relationship is revoked, the hedging instrument expires, is sold, terminated,
exercised, or no longer qualifies for hedge accounting.
Cash flow hedge
Changes in the fair value of designated and qualifying cash flow hedges are deferred in equity. Where it is expected that all or a portion of
a loss recognised directly in equity will not be recovered in future periods, that loss is recognised in the statement of profit or loss.
Amounts deferred are included in the initial measurement of the cost of the asset or liability where the forecast transaction being hedged
results in the recognition of a non-financial asset or a non-financial liability.
Cash flow hedges relating to operating activities are recognised in profit or loss in the same period the hedged item is recognised in profit
or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss deferred in equity is recognised
immediately in profit or loss.
Hedges of net investments in foreign operations
Gains or losses on the hedging instrument are recognised in the foreign currency translation reserve. Gains and losses deferred in the
foreign currency translation reserve are recognised in profit or loss upon disposal of the foreign operation.
Fair value hedge
Changes in the fair value of designated and qualifying fair value hedges are recorded in profit or loss, together with any changes in the fair
value of the hedged item that is attributable to the hedged risk. When hedge accounting is discontinued the adjustment to the carrying
amount of the hedged item arising from the hedged risk is amortised to profit or loss from that date. The gain or loss relating to the
ineffective portion is recognised immediately in profit or loss as part of other expenses or other income.
Call option to acquire remaining shares in joint venture
Changes in the fair value of the option are recorded in profit and loss. If the option is called the joint venture will be acquired in a business
combination and the fair value of the option at the point it is utilised will form part of the purchase consideration for the remaining shares.
g) Inventories
Inventories are carried at the lower of cost and net realisable value. Inventories comprise:
Property developments
Cost includes the costs of acquisition, development and holding costs such as rates, taxes and finance costs. Holding costs on property
developments not under active development are expensed as incurred.
Raw materials and consumables
Cost is based on the weighted average principle and includes expenditure incurred in acquiring the inventories and bringing them to their
existing condition and location.
h) Assets held for sale and liabilities associated with assets held for sale
Assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction,
rather than through continuing use, and a sale is considered highly probable. They are measured at the lower of their carrying amount and
fair value less costs to sell.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A
gain is recognised for any subsequent increases in fair value less costs to sell of an asset, but not in excess of any cumulative impairment
loss previously recognised.
Assets classified as held for sale are presented separately from the other assets in the statement of financial position. Assets are not
depreciated or amortised while they are classified as held for sale.
Liabilities associated with assets held for sale are presented separately from other liabilities in the statement of financial position. Interest
and other expenses attributable to the liabilities associated with assets held for sale continue to be recognised.
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