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profit-taking. Derivatives are also categorised as held for trading unless they are designated and ef-
fective as hedging instruments. Financial assets held for trading consist of debt instruments, including
money-market paper, as well as financial assets with embedded derivatives. They are recognised in the
consolidated statement of financial position as ‘non-pledged trading assets ’.

Financial instruments included in this category are recognised initially at fair value; transaction costs
are taken directly to the consolidated income statement. Gains and losses arising from changes in
fair value are included directly in the consolidated income statement and are reported as Net gains on
financial instruments classified as held for trading. Interest income and expense and dividend income
and expenses on financial assets held for trading are included in ‘Net interest income’ or ‘Dividend
income’, respectively. The instruments are derecognised when the rights to receive cash flows have
expired or the Group has transferred substantially all the risks and rewards of ownership and the trans-
fer qualifies for derecognising.

The Group designates certain financial assets upon initial recognition as at fair value through profit or
loss (fair value option). This designation cannot subsequently be changed. According to IAS 39, the fair
value option is only applied when the following conditions are met:

• The assets or liabilities are managed, evaluated and reported internally on a fair value basis. •
• The designation eliminates or significantly reduces an accounting mismatch which would other-
wise arise.
• The asset or liability contains an embedded derivative that significantly modifies the cash flows
that would otherwise be required under the contract.

[ii] Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market and that the Group does not intend to sell immediately or in the near
term.
Finance lease receivables are reported within loans and receivables where the Group is the lessor in a
lease agreement. Such lease agreement transfers substantially all of the risks and rewards incidental to
ownership of an asset to the lessee. The loans and receivables equal to the net investment in the lease
is recognised and presented within loans and advances.

When the Group purchases a financial asset and simultaneously enters into an agreement to resell
the asset (or a substantially similar asset) at a fixed price on a future date (“reverse repo or stock
borrowing”), the arrangement is accounted for as a loan or advance, and the underlying asset is not
recognised in the Group’s financial statements.

Loans and receivables are initially recognised at fair value – which is the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date – and measured subsequently at amortised cost using the effective interest rate
method. Loans and receivables are reported in the consolidated statement of financial position as
loans and advances to banks or customers or as investment securities. Interest on loans is included in
the consolidated income statement and is reported as ‘Interest income’. In the case of an impairment,
the impairment loss is reported as a deduction from the carrying value of the loan and recognised in
the consolidated income statement under “net impairment loss on financial assets”

[iii] Held-to-maturity
Held-to-maturity investments are non-derivative assets with fixed or determinable payments and
fixed maturity that the Group has the positive intent and ability to hold to maturity, and which are not
designated at fair value through profit or loss, loans and receivables or available-for-sale.

These are initially recognised at fair value including direct and incremental transaction costs and mea-
sured subsequently at amortised cost, using the effective interest method. Any sale or reclassification
of a significant amount of held-to-maturity investments not close to their maturity would result in the
reclassification of all held-to-maturity investments as available-for- sale, and prevent the Group from
classifying investment securities as held-to-maturity for the current and the following two financial
years. However, sales and reclassifications in any of the following circumstances would not trigger a

184 Access BAnk Plc
Annual Report & Accounts 2017