SBN HOLDINGS LIMITED Annual Report 2022

ANNEXURE D - DETAILED ACCOUNTING POLICIES continued 150 SBN HOLDINGS LIMITED Annual report 2022 151 1. Basis of consolidation continued 2. Common control transactions Common control transactions, in which the company is the ultimate parent entity both before and after the transaction, are accounted for at book value. Foreign currency translations Group companies The results and financial position of foreign operations that have a functional currency that is different from the group's presentation currency are translated into the group's presentation currency as follows: ■assets and liabilities (including goodwill, intangible assets and fair value adjustments arising on acquisition) are translated at the closing rate at the reporting date; ■ income and expenses are translated at average exchange rate; and ■ all resulting foreign exchange differences are accounted for directly in a separate component of OCI, being the group's FCTR. Transactions and balances Foreign currency transactions are translated into the respective group entities' functional currencies at exchange rates prevailing at the date of the transactions (in certain instances a rate that approximates the actual rate at the date of the transaction is utilised, for example an average rate for a month). Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates, are recognised in profit or loss (except when recognised in OCI as part of qualifying cash flow hedges and net investment hedges). Non-monetary assets and liabilities denominated in foreign currencies that are measured at historical cost are translated using the exchange rate at the transaction date, and those measured at fair value are translated at the exchange rate at the date that the fair value was determined. Exchange rate differences on non-monetary items are accounted for based on the classification of the underlying items. Foreign exchange gains and losses on equities (debt) classified as fair value through OCI are recognised in the fair value through OCI reserve in OCI (trading revenue) whereas the exchange differences on equities (debt) that are classified as held at fair value through profit or loss are reported as part of other revenue (trading revenue). Foreign currency gains and losses on intragroup loans are recognised in profit or loss except where the settlement of the loan is neither planned nor likely to occur in the foreseeable future. In these cases the foreign currency gains and losses are recognised in the group's FCTR. Interest in joint ventures Joint ventures are initially measured at cost and subsequently accounted for using the equity method at an amount that reflects the group's share of the net assets of the joint venture (including goodwill). Equity accounting is applied from the date on which the entity becomes a joint venture up to the date on which the group ceases to have joint control. Equity accounting of losses is restricted to the interests in these entities, including unsecured receivables or other commitments, unless the group has an obligation or has made payments on behalf of the joint venture. Unrealised profits from transactions are eliminated in determining the group's share of equity accounted profits. Unrealised losses are eliminated in the same way as unrealised gains (but only to the extent that there is no evidence of impairment). Where there is an indicator of impairment the carrying amount of the investment is tested for impairment by comparing its recoverable amount with its carrying amount. Impairment losses are recognised through non-trading and capital related items. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount, but only to the extent that the investment's carrying amount does not exceed the carrying amount that would have been determined, net of equity accounted losses, if no impairment loss had been recognised. For a disposal of a joint venture, being where the group loses joint control over a joint venture, the difference between the sales proceeds and any retained interest and the carrying value of the equity accounted investment is recognised as a gain or loss in non-trading and capital related items. Any gains or losses in OCI reserves that relate to the associate or joint venture are reclassified to non-trading and capital related items at the time of the disposal. The accounting policies of joint ventures have been changed where necessary to ensure consistency with the policies of the group. Private equity and venture capital investments Private equity and venture capital investments, including mutual funds held by investment-linked insurance funds that are associates. These associates are either designated on initial recognition at fair value through profit or loss, or are equity accounted. 3. Financial instruments Initial measurement - financial instruments All financial instruments are measured initially at fair value plus directly attributable transaction costs and fees, except for those financial instruments that are subsequently measured at fair value through profit or loss where such transaction costs and fees are immediately recognised in profit or loss. Financial instruments are recognised (derecognised) on the date the group commits to purchase (sell) the instruments (trade date accounting). Financial instruments Financial assets Financial liabilities Financial guarantee contracts Derivatives Hedge accounting Other Amortised cost Held-for- trading Fair value through OCI Designated Held for trading Designated at fair value through profit or loss Fair value through profit or loss - default at fair value through profit or loss Amortised cost Fair value hedges Cash flow hedges Sale and repurchase agreements and lending of securities (including commodities) Hedge accounting Offsetting risk management strategy

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