Financial Statements of Waikato River Clean-Up Trust
for the period ended 30 June 2012
32
A financial instrument is recognised if the Trust becomes a party to the
contractual provisions of the instrument. Financial assets are derecognised
if the Trust’s contractual rights to the cash flows from the financial assets
expire or if the Trust transfers the financial asset to another party without
retaining control or substantially all risks and rewards of the asset. Purchases
and sales of financial assets are accounted for at trade date, i.e., the date that
the Trust commits itself to purchase or sell the asset. Financial liabilities are
derecognised if the Trust’s obligations specified in the contract expire or are
discharged or cancelled.
Cash and cash equivalents comprise cash balances and call deposits. Bank
overdrafts that are repayable on demand and form an integral part of the
trust’s cash management are included as a component of cash and cash
equivalents for the purpose of the statement of cash flows.
Instruments at fair value through profit or loss
An instrument is classified as at fair value through profit or loss if it is
held for trading or is designated as such upon initial recognition. Financial
instruments are designated at fair value through profit or loss if the trust
manages such investments and makes purchase and sale decisions based
on their fair value. Upon initial recognition, attributable transaction costs
are recognised in the statement of comprehensive income when incurred.
Subsequent to initial recognition, financial instruments at fair value through
profit or loss are measured at fair value, and changes therein are recognised
in statement of comprehensive income.
Trade receivables
Trade receivables classified as other non-derivative financial instruments
are stated at amortised cost using the effective interest method, less any
impairment losses.
Trade payables
Trade payables are classified as other non-derivative financial instruments
and are stated at amortised cost.
b) Impairment
The carrying amounts of the Trust’s assets, are reviewed at each balance sheet
date to determine whether there is any objective evidence of impairment. An
impairment loss is recognised whenever the carrying amount of an asset exceeds
its recoverable amount. Impairment losses directly reduce the carrying amount of
assets and are recognised in profit or loss.
i) Impairment of loans and receivables
Impairment losses on an individual basis are determined by an evaluation
of the exposures on an instrument by instrument basis. All individual
instruments that are considered significant are subject to this approach.
For trade receivables which are not significant on an individual basis,
collective impairment is assessed on a portfolio basis based on numbers
of days overdue, and taking into account the historical loss experience in
portfolios with a similar amount of days overdue.
The recoverable amount of the trust’s loans and receivables carried at
amortised cost is calculated as the present value of estimated future cash
flows, discounted at the original effective interest rate (i.e., the effective
interest rate computed at initial recognition of these financial assets).
Receivables with short duration are not discounted.
If, in a subsequent period, the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment
was recognised, the previously recognised impairment loss is reversed. The
reversal does not result in a carrying amount of the financial asset that exceeds
what the amortised cost would have been had the impairment not been
recognised at the date the impairment is reversed. The amount of the reversal
is recognised in the statement of comprehensive income.
An impairment loss in respect of goodwill is not reversed. In respect of other
assets, impairment losses recognised in prior periods are assessed at each