Page 186 - ACCESS BANK ANNUAL REPORTS_eBook

deposit, and the underlying asset continues to be recognised in the Group’s financial statements as
pledged assets.

The Group classifies debt instruments as financial liabilities or equity in accordance with the contrac-
tual terms of the instrument.

Deposits and debt securities issued are initially measured at fair value minus incremental direct trans-
action costs, and subsequently measured at their amortised cost using the effective interest method,
except where the Group designates liabilities at fair value through profit or loss.

On this statement of financial position, other financial liabilities carried at amortised cost include
deposit from banks, deposit from customers, interest bearing borrowings, debt securities issued and
other liabilities

[ii] Financial liabilities at fair value
The Group may enter into a variety of derivative financial instruments to manage its exposure to
interest rate and foreign exchange rate risk, including foreign exchange forward contracts, interest rate
swaps and foreign currency options. Further details of derivative financial instruments are disclosed in
Note 21 to the financial statements.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are
subsequently remeasured to their fair value at each balance sheet date. A derivative with a positive fair
value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a
financial liability. The resulting gain or loss is recognised in profit or loss immediately unless the deriv-
ative is designated and effective as a hedging instrument, in which event the timing of the recognition
in profit or loss depends on the nature of the hedge relationship. Derivatives are presented as financial
assets or financial liabilities.

Derivative assets and liabilities are only offset if the transactions are with the same counterparty, a
legal right of offset exists and the parties intend to settle on a net basis.

(c) De-recognition

[i] Financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the
financial asset expire, or when it transfers the financial asset in a transaction in which substantially all
the risks and rewards of ownership of the financial asset are transferred or in which the Group neither
transfers nor retains substantially all the risks and rewards of ownership and it does not retain control
of the financial asset. Any interest in transferred financial assets that is created or retained by the
Group is recognised as a separate asset or liability in the statement of financial position. On derecog-
nition of a financial asset, the difference between the carrying amount of the asset (or the carrying
amount allocated to the portion of the asset transferred), and the sum of (i) the consideration received
( including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss
that had been recognised in other comprehensive income is recognised in the income statement.

The Group enters into transactions whereby it transfers assets recognised on its financial position,
but retains either all or substantially all of the risks and rewards of the transferred assets or a portion
of them. If all or substantially all risks and rewards are retained, then the transferred assets are not
derecognised from the financial position. Transfers of assets with retention of all or substantially all
risks and rewards include, for example, securities lending and repurchase transactions.

When assets are sold to a third party with a concurrent total rate of return swap on the transferred
assets, the transaction is accounted for as a secured financing transaction similar to repurchase trans-
actions as the Group retains all or substantially all the risks and rewards of ownership of such assets.

In transactions in which the Group neither retains nor transfers substantially all the risks and rewards
of ownership of a financial asset and it retains control over the asset, the group continues to recognise
the asset to the extent of its continuing involvement, determined by the extent to which it is exposed

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Annual Report & Accounts 2017