NOTES TO
FINANCIAL STATEMENTS
59
GDS Global Limited Annual Report 2015
As at 30 September 2015
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Impairment of financial assets
Financial assets, other than those at fair value through profit or loss, are assessed for indicators of
impairment at the end of each reporting period. Financial assets are considered to be impaired
when there is objective evidence that, as a result of one or more events that occurred after the
initial recognition of the financial asset, the estimated future cash flows of the investment have
been impacted.
For available-for-sale equity instruments, a significant or prolonged decline in the fair value of the
investment below its cost is considered to be objective evidence of impairment.
For all other financial assets, objective evidence of impairment could include:
Significant financial difficulty of the issuer or counterparty; or
Default or delinquency in interest or principal payments; or
It becoming probable that the borrower will enter bankruptcy or financial re-organisation.
For certain categories of financial assets, such as trade receivables, assets that are assessed not to
be impaired individually are, in addition, assessed for impairment on a collective basis. Objective
evidence of impairment for a portfolio of receivables could include the Group’s past experience
of collecting payments, an increase in the number of delayed payments in the portfolio past the
average credit period, as well as observable changes in national or local economic conditions that
correlate with default on receivables.
For financial assets carried at amortised cost, the amount of the impairment is the difference
between the asset’s carrying amount and the present value of estimated future cash flows,
discounted at the original effective interest rate.
For financial assets that are carried at cost, the amount of the impairment loss is measured as the
difference between the asset’s carrying amount and the present value of the estimated future cash
flows discounted at the current market rate of return for a similar financial asset. Such impairment
loss will not be reversed in subsequent periods.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial
assets with the exception of trade and other receivables where the carrying amount is reduced
through the use of an allowance account. When a trade and other receivable is uncollectible, it
is written off against the allowance account. Subsequent recoveries of amounts previously written
off are credited to the profit or loss. Changes in the carrying amount of the allowance account are
recognised in profit or loss.
For financial assets measured at amortised cost, 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
through profit or loss to the extent that the carrying amount of the financial asset at the date
the impairment is reversed does not exceed what the amortised cost would have been had the
impairment not been recognised.
When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses
previously recognised in other comprehensive income are reclassified to profit or loss.
