Page 57 - Stellar IAR2015

1.4.2. Financial instruments at fair value through pro t or loss (FVTPL)Financial assets or nancial liabilities are classi ed as at FVTPL where the nancial instrument is either held for trading or it is designated as at FVTPL.A nancial asset is classi ed as held for trading if:• has been acquired principally for the purpose of selling in the short term; or • it has been so designated by management; or• it is a derivative that is not designated as a hedging instrument.A nancial asset or nancial liabilities, other than a nancial asset/liability held for trading, is designated as at FVTPL upon initial recognition if:• the nancial asset forms part of a Group of nancial assets, nancial liabilities or both, which is managed and its performance isevaluated on a fair value basis; or• such designation eliminates or signi cantly reduces a measurement or recognition inconsistency that would otherwise arise; or • it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract (assetor liability) to be designated as at FVTPL.Financial assets at fair value through pro t or loss are initially and subsequently recognised at fair value. Transaction costs are expensed in the statement of comprehensive income.1.4.3. Loans and receivablesLoans and receivables are non-derivative nancial assets with xed or determinable payments that are not quoted in an active market.Financial assets classi ed as loans and receivables are initially recognised at fair value plus any transaction costs. Subsequent to initial recognition, loans and receivables are carried at amortised cost using the e ective interest rate method, less any provision for impairment.Loans and receivables comprise loan investments, loans to portfolio companies, loans to Consolidated Subsidiaries, other nancial assets and trade receivables.Appropriate allowances for estimated irrecoverable amounts are recognised in pro t or loss when there is objective evidence that the asset is impaired.1.4.4. E ective interest methodThe e ective interest method is a method of calculating the amortised cost of a nancial asset/liability and of allocating interest income over the relevant period. The e ective interest rate is the rate that exactly discounts estimated future cash receipts/payments (including all fees paid or received that form an integral part of the e ective interest rate, transaction costs and other premiums or discounts) through the expected life of the nancial asset/liability, or, where appropriate, a shorter period. Interest income/expense is recognised on an e ective interest basis for instruments other than those designated as at FVTPL.1.4.5. Cash and cash equivalentsCash and cash equivalents comprise cash on hand, demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insigni cant risk of changes in value. These are initially and subsequently recorded at fair value.STELLAR CAPITAL PARTNERS | 53