NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2014
Financial Statements
96
COSCO Corporation (Singapore) Limited
2.
Significant accounting policies
(continued)
2.11 Financial assets (continued)
(f)
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when
there is a legally enforceable right to offset and there is an intention to settle on a net basis or realise
the asset and settle the liability simultaneously.
2.12 Financial guarantees
The Company issues corporate guarantees to banks for borrowings of its subsidiaries and third parties for
services provided to a subsidiary. These guarantees are financial guarantees as they require the Company
to reimburse the banks and third parties if the subsidiaries fail to make principal or interest payments when
due in accordance with the terms of their borrowings.
Financial guarantees are initially recognised at their fair values plus transaction costs in the Company’s
balance sheet.
Financial guarantees are subsequently amortised to profit or loss over the period of the subsidiaries’
borrowings, unless it is probable that the Company will reimburse the banks for an amount higher than the
unamortised amount. In this case, the financial guarantees shall be carried at the expected amount payable
to the banks in the Company’s balance sheet.
Intra-group transactions are eliminated on consolidation.
2.13 Borrowings
Borrowings are presented as current liabilities unless the Group has an unconditional right to defer
settlement for at least 12 months after the balance sheet date, in which case they are presented as non-
current liabilities.
Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at
amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is
recognised in profit or loss over the period of the borrowings using the effective interest method.
2.14 Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end
of financial year which are unpaid. They are classified as current liabilities if payment is due within one year
or less (or in the normal operating cycle of the business if longer). Otherwise, they are presented as non-
current liabilities.
Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost
using the effective interest method.
2.15 Derivative financial instruments and hedging activities
A derivative financial instrument is initially recognised at its fair value on the date the contract is entered
into and is subsequently carried at its fair value. The method of recognising the resulting gain or loss
depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item
being hedged. The Group designates each hedge as fair value hedge.
Fair value changes on derivatives that are not designated or do not qualify for hedge accounting are
recognised in profit or loss when the changes arise.
