NOTES TO
FINANCIAL STATEMENTS
61
GDS Global Limited Annual Report 2015
As at 30 September 2015
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
A financial liability other than a financial liability held for trading may be designated as at FVTPL
upon initial recognition if:
Such designation eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise; or
On initial recognition, the financial liability forms part of a group of financial assets or
financial liabilities or both, which is managed and its performance is evaluated on a fair value
basis, in accordance with the Group’s documented risk management or investment strategy,
and information about the grouping is provided internally on that basis; or
It forms part of a contract containing one or more embedded derivatives, and FRS 39
permits the entire combined contract (asset or liability) to be designated as at FVTPL.
Financial liabilities at fair value through profit or loss are initially measured at fair value and
subsequently stated at fair value, with any resultant gain or loss recognised in profit or loss. The
net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability
and is included in the ‘other gains and losses’ line in the statement of profit or loss and other
comprehensive income.
Other financial liabilities
Trade and other payables are initially measured at fair value, net of transaction costs, and are
subsequently measured at amortised cost, using the effective interest method, with interest
expense recognised on an effective yield basis.
Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently
measured at amortised cost, using the effective interest method. Interest expense calculated using
the effective interest method is recognised over the term of the borrowings in accordance with the
Group’s accounting policy for borrowing costs (see below).
Financial guarantee contract liabilities are measured initially at their fair values and, if not
designated as at FVTPL, subsequently at the higher of the amount of obligation under the
contract recognised as a provision in accordance with FRS 37 Provisions, Contingent Liabilities and
Contingent Assets and the amount initially recognised less cumulative amortisation in accordance
with FRS 18 Revenue.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are
discharged, cancelled or they expire.
Offsetting
arrangements
Financial assets and financial liabilities are offset and the net amount presented in the statement of
financial position when the Company and the Group has a legally enforceable right to set off the
recognised amounts; and intends either to settle on a net basis, or to realise the asset and settle
the liability simultaneously. A right to set-off must be available today rather than being contingent
on a future event and must be exercisable by any of the counterparties, both in the normal course
of business and in the event of default, insolvency or bankruptcy.
