NOTES TO
FINANCIAL STATEMENTS
57
GDS Global Limited Annual Report 2015
As at 30 September 2015
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
The measurement period is the period from the date of acquisition to the date the Group obtains
complete information about facts and circumstances that existed as of the acquisition date and is
subject to a maximum of one year from acquisition date.
MERGER RESERVE - Merger reserve represents the difference between the nominal amount of the
share capital of the subsidiaries at the date on which they were acquired by the Group from a
common shareholder and consideration paid for the acquisition.
FINANCIAL INSTRUMENTS - Financial assets and financial liabilities are recognised on the
statement of financial position when the Group becomes a party to the contractual provisions of
the instruments.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial instrument
and of allocating interest income or expense over the relevant period. The effective interest rate
is the rate that exactly discounts estimated future cash receipts or payments (including all fees on
points paid or received that form an integral part of the effective interest rate, transaction costs
and other premiums or discounts) through the expected life of the financial instrument, or where
appropriate, a shorter period. Income and expense is recognised on an effective interest basis for
debt instruments other than those financial instruments “at fair value through profit or loss”.
Financial assets
All financial assets are recognised and de-recognised on a trade date basis where the purchase
or sale of an investment is under a contract whose terms require delivery of the investment within
the timeframe established by the market concerned, and are initially measured at fair value plus
transaction costs, except for those financial assets classified as at fair value through profit or loss
which are initially measured at fair value.
Financial assets are classified into the following specified categories: financial assets “at fair value
through profit or loss”, “held-to-maturity investments”, “available-for-sale” financial assets and
“loans and receivables”. The classification depends on the nature and purpose of financial assets
and is determined at the time of initial recognition.
Financial assets at fair value through profit or loss (“FVTPL”)
Financial assets are classified as at FVTPL where the financial asset is either held for trading or it is
designated as at FVTPL.
A financial asset is classified as held for trading if:
It has been acquired principally for the purpose of selling in the near future; or
On initial recognition, it is part of an identified portfolio of financial instruments that the
Group manages together and has a recent actual pattern of short-term profit-taking; or
It is a derivative that is not designated and effective as a hedging instrument.
