Investor Presentaiton
MORGAN STANLEY BANK ASIA LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2020
3.
d.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair value (continued)
Gains and losses on inception
In the normal course of business, the fair value of a financial instrument on initial recognition is the
transaction price (i.e. the fair value of the consideration given or received). In certain circumstances,
however, the fair value will be based on other observable current market transactions in the same
instrument, without modification or repackaging, or on a valuation technique whose variables include
only data from observable markets. When such evidence exists, the Company recognises a gain or loss
on inception of the transaction.
When the use of unobservable market data has a significant impact on determining fair value at the
inception of the transaction, the entire initial gain or loss indicated by the valuation technique as at the
transaction date is not recognised immediately in the income statement, but is deferred and recognised
over the life of the instrument or at the earlier of when the unobservable market data become observable,
maturity or disposal of the instrument.
e.
Derecognition of financial assets and liabilities
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and substantially all the risk and rewards of ownership of
the asset.
If the asset has been transferred, and the Company neither transfers nor retains substantially all of the
risks and rewards of the asset, then the Company determines whether it has retained control of the asset.
If the Company has retained control of the asset, it shall continue to recognise the financial asset to the
extent of its continuing involvement in the financial asset. If the Company has not retained control of
the asset, it derecognises the asset and separately recognises any rights or obligation created or retained
in the transfer.
The renegotiation or modification of the contractual cash flows of a financial instrument can lead to
derecognition where the modification is "substantial", determined by qualitative assessment of whether
the revised contractual terms of a financial instrument, such as a loan, are significantly different from
those of the original financial instrument. In the event that the qualitative assessment is unclear, a
quantitative 10% cash flow test is performed.
Where modifications do not result in derecognition of the financial instrument, the gross carrying amount
of the financial instrument is recalculated and a modification gain/ (loss) is recognised in the income
statement.
Upon derecognition of a financial asset, the difference between the previous carrying amount and the
sum of any consideration received, together with the transfer of any cumulative gain/loss previously
recognised in equity, are recognised in the income statement within 'Net gains/(losses) on derecognition
of financial assets measured at FVOCI'.
The Company derecognises financial liabilities when the Company's obligations are discharged or
cancelled or when they expire.
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