Annual report 2012
Derivatives are also categorised as held for trading.
Financial assets acquired principally for the purpose of
selling in the short-term or part of a portfolio classified
as held for trading are classified as a current asset.
After initial recognition, financial assets in this category
are measured at their fair values with gains or losses on
remeasurement recognised in the surplus or deficit.
Loans and receivables (including cash and cash
equivalents and debtors and other receivables)
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted
in an active market. They are included in current assets,
except for maturities greater than 12 months after the
balance date, which are included in non-current assets.
After initial recognition, loans and receivables are
measured at amortised cost using the effective interest
method less any provision for impairment.
Gains and losses when the asset is impaired or
derecognised are recognised in the surplus or deficit.
Financial assets at fair value through other
comprehensive income
Financial assets at fair value through other
comprehensive income are those that are designated as
fair value through other comprehensive income or are
not classified in any of the other categories above.
They are included in non-current assets unless
management intends to realise the investment within
12 months of balance date. The Institute and group
designates in this category:
• investments that it intends to hold long-term but
which may be realised before maturity; and
• shareholdings that it holds for strategic purposes.
After initial recognition, these investments are measured
at their fair value, with gains and losses recognised in
other comprehensive income, except for impairment
losses, which are recognised in the surplus or deficit.
On derecognition, the cumulative gain or loss previously
recognised in other comprehensive income is reclassified
from equity to the surplus or deficit.
Impairment of financial assets
At each balance date, Te Wānanga o Aotearoa assesses
whether there is any objective evidence that a financial
asset or group of financial assets is impaired.
Any impairment losses are recognised in the surplus
or deficit.
Loans and receivables (including cash and cash
equivalents and debtors and other receivables)
Impairment of a loan or a receivable is established when
there is objective evidence that Te Wānanga o Aotearoa
will not be able to collect amounts due according to
the original terms of the loan or receivable. Significant
financial difficulties of the debtor, probability that
the debtor will enter into bankruptcy, receivership, or
liquidation, and default in payments are considered
indicators that the asset is impaired. The amount of the
impairment is the difference between the asset’s carrying
amount and the present value of estimated future cash
flows, discounted using the original effective interest
rate. For debtors and other receivables, the carrying
amount of the asset is reduced through the
use of an allowance account, and the amount of the
loss is recognised in the surplus or deficit. When the
receivable is uncollectible, it is written off against the
allowance account.
Overdue receivables that have been renegotiated are
reclassified as current (that is, not past due). For other
financial assets, impairment losses are recognised
directly against the instrument’s carrying amount.
Financial assets at fair value through other
comprehensive income
For equity investments, a significant or prolonged
decline in the fair value of the investment below its cost
is considered objective evidence of impairment.
For debt investments, significant financial difficulties
of the debtor, probability that the debtor will enter
into receivership or liquidation, and default in payments
are considered objective indicators that the asset
is impaired.
If impairment evidence exists for investments at
fair value through other comprehensive income, the
cumulative loss (measured as the difference between
the acquisition cost and the current fair value, less
any impairment loss on that financial asset previously
recognised in the surplus or deficit) recognised in other
comprehensive income is reclassified from equity to the
surplus or deficit.
Equity instrument impairment losses recognised in the
surplus or deficit are not reversed through the surplus
or deficit.
If in a subsequent period the fair value of a debt
instrument increases and the increase can be objectively
related to an event occurring after the impairment loss
was recognised, the impairment loss is reversed in the
surplus or deficit.
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