Notes to the financial statements
Year ended 31 March 2016
3 Significant accounting policies (continued)
(h)
Impairment
(i)
Non-derivative financial assets
A financial asset not carried at fair value through profit or loss, including an interest in joint venture, is
assessed at the end of each reporting period to determine whether there is objective evidence that it is
impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after
the initial recognition of the asset, and that the loss event has a negative effect on the estimated future
cash flows of that asset that can be estimated reliably.
Objective evidence that financial assets are impaired can include default or delinquency by a debtor,
restructuring of an amount due to the Group on terms that the Group would not consider otherwise,
indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of
borrowers or issuers in the Group, economic conditions that correlate with defaults or the disappearance
of an active market for a security.
Loans and receivables
The Group considers evidence of impairment for loans and receivables at both a specific asset and
collective level. All individually significant loans and receivables are assessed for specific impairment. All
individually significant receivables found not to be specifically impaired are then collectively assessed
for any impairment that has been incurred but not yet identified. Loans and receivables that are not
individually significant are collectively assessed for impairment by grouping together loans and receivables
with similar risk characteristics.
In assessing collective impairment, the Group uses historical trends of the probability of default, the
timing of recoveries and the amount of loss incurred, adjusted for the Manager’s judgement as to whether
current economic and credit conditions are such that the actual losses are likely to be greater or less than
suggested by historical trends.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash flows, discounted at the
asset’s original effective interest rate. Losses are recognised in the Statement of Total Return and reflected
in an allowance account against loans and receivables. Interest on the impaired asset continues to be
recognised. When a subsequent event (e.g. repayment by a debtor) causes the amount of impairment loss
to decrease, the decrease in impairment loss is reversed through the Statement of Total Return.
Joint venture
An impairment loss in respect of an associate or joint venture is measured by comparing the recoverable
amount of the investment with its carrying amount. An impairment loss is recognised in profit or loss. An
impairment loss is reversed if there has been a favourable change in the estimates used to determine the
recoverable amount.
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A-REIT ANNUAL REPORT
2015/2016
