Page 169 - Adopt-a-School Foundation 2016-2017 Annual Report

ADOPT-A-SCHOOL FOUNDATION NPC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
for the year ended 30 June 2017

1.8 financial instruments (continued)
impairment of financial assets

The Foundation assesses at the end of each reporting period whether there is objective evidence that a financial asset or company of financial assets is
impaired. A financial asset or a company of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a
result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated
future cash flows of the financial asset or company of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a company of debtors is experiencing significant financial difficulty, default or delinquency
in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that
there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of
estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The
carrying amount of the asset reduced and the amount of the loss is recognised in profit or loss. If a loan or held-to-maturity investment has a variable interest
rate, the discount rate of measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the
Foundation may measure impairment on the basis of the instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment
was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss.

Details on how the fair value of financial instruments is determined are disclosed in note 3.

Impairment testing of trade receivables is described in note 4.

1.9 equity-linked instruments

Equity linked instruments are classified as derivatives.

A derivative is a financial instrument that derives its value from an underlying variable, which requires little or no initial investment and is settled at a future
date. All derivative instruments are accounted for at fair value through profit or loss.

Derivative financial instruments are initially recognised at the fair value on the date on which they are entered into and, are subsequently re-measured at their
fair value with changes in fair value recognised in the statement of comprehensive income. They are carried as assets when their fair value is positive and as
liabilities when negative.

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