Investor Presentaiton
HKAS 1.51(a)
HKAS 1.49
HKFRS 7.B5(e)
HK Listco Ltd
Financial statements for the year ended 31 December 2023
FVOCI - recycling, if the contractual cash flows of the investment comprise solely payments
of principal and interest and the investment is held within a business model whose objective
is achieved by both the collection of contractual cash flows and sale. Expected credit losses,
interest income (calculated using the effective interest method) and foreign exchange gains
and losses are recognised in profit or loss and computed in the same manner as if the
financial asset was measured at amortised cost. The difference between the fair value and
the amortised cost is recognised in OCI. When the investment is derecognised, the amount
accumulated in OCI is recycled from equity to profit or loss.
FVPL if the investment does not meet the criteria for being measured at amortised cost or
FVOCI (recycling). Changes in the fair value of the investment (including interest) are
recognised in profit or loss.
(ii) Equity investments
An investment in equity securities is classified as FVPL, unless the investment is not held for
trading purposes and on initial recognition the group makes an irrevocable election to designate
the investment at FVOCI (non-recycling) such that subsequent changes in fair value are
recognised in OCI. Such elections are made on an instrument-by-instrument basis, but may only
be made if the investment meets the definition of equity from the issuer's perspective. If such
election is made for a particular investment, at the time of disposal, the amount accumulated in
the fair value reserve (non-recycling) is transferred to retained earnings and not recycled through
profit or loss. Dividends from an investment in equity securities, irrespective of whether classified
as at FVPL or FVOCI, are recognised in profit or loss as other income (see note 1(aa)(ii)(b)).
HKFRS 7.21
HKFRS 7.B5(e)
HKFRS 7.21
(h)
(i)
(i)
Derivative financial instruments
The group holds derivative financial instruments to manage its foreign currency and interest rate
risk exposures. Embedded derivatives are separated from the host contract and accounted for
separately if the host contract is not a financial asset and certain criteria are met.
Derivatives are initially measured at fair value. Subsequently, they are measured at fair value
with changes therein recognised in profit or loss, except where the derivatives qualify for cash
flow hedge accounting or hedges of net investment in a foreign operation (see note 1(i)).
Hedging⁹0
The group designates certain derivatives as hedging instruments to hedge the variability in cash
flows associated with highly probable forecast transactions arising from changes in foreign
exchange rates and variable rate borrowings. Some borrowings are designated as hedges of the
foreign exchange risk of a net investment in a foreign operation.
Cash flow hedges
When a derivative is designated as a cash flow hedging instrument, the effective portion of
changes in the fair value of the derivative is recognised in OCI and accumulated in the hedging
reserve within equity. The effective portion that is recognised in OCI is limited to the cumulative
change in fair value of the hedged item, determined on a present value basis, from inception of
the hedge. Any ineffective portion is recognised immediately in profit or loss.
HKFRS 9.7.2.21,
22 & 26
90
Until the IASB completes its project on accounting for dynamic risk management and the resulting pronouncements are adopted by the
HKICPA as part of HKFRSS, entities have an accounting policy choice to apply the hedge accounting requirements under HKFRS 9 or to
continue applying HKAS 39 hedge accounting. This policy choice should be applied to all (including both existing and new) hedging
relationships. If an entity decides to apply HKFRS 9 hedge accounting requirements, it may either apply the requirements upon the
initial application of HKFRS 9 or in subsequent periods as a change in accounting policy.
Regardless of whether the entity applies HKFRS 9 hedge accounting requirements upon the initial adoption of HKFRS 9 or in subsequent
periods, in the first year of adoption it should follow the hedge accounting transition requirements in HKFRS 9 and provide the
transitional disclosures in accordance with HKAS 8.
In this illustration, HK Listco applied HKFRS 9 hedge accounting requirements upon the initial adoption of HKFRS 9 in 2018. For an
illustration of the transitional disclosures, please refer to the December 2018 edition of the illustrative financial statements.
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