Investor Presentaiton
MORGAN STANLEY BANK ASIA LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2020
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C.
ii)
Financial instruments (continued)
Financial assets measured at FVOCI
Financial assets measured at FVOCI include government debt securities.
Financial assets measured at FVOCI are financial instruments which are held within a business model
whose objective is achieved both by collecting contractual cash flows and selling financial assets and
the contractual terms of which give rise on specified dates to cash flows that are solely payments of
principal and interest ("SPPI") on the principal amount outstanding. Financial assets measured at
FVOCI are recorded on trade date and are initially recognised and subsequently measured at fair value
(see note 3(d) below).
Transaction costs that are directly attributable to the acquisition of a financial asset measured at FVOCI
are added to the fair value on initial recognition.
Interest calculated using the effective interest rate ("EIR") method (see note 3(c)(iii) below) is
recognised in the income statement in 'Interest income'. Foreign exchange differences on the amortised
cost of the asset are recognised in the income statement in ‘Other revenue' or 'Other expense'.
Movement in expected credit loss ("ECL") allowance is recognised in both the income statement in
'Net impairment loss on financial instruments' and in the statement of comprehensive income in the
'FVOCI reserve'. All other gains and losses on financial assets measured at FVOCI are recognised in
the 'FVOCI reserve' within equity.
On derecognition of a financial asset measured at FVOCI, the cumulative gain or loss in the 'FVOCI
reserve' is reclassified to the income statement and reported in 'Net gains on derecognition of financial
assets measured at FVOCI'.
iii)
Financial assets and financial liabilities at amortised cost
Financial assets at amortised cost include cash and short-term deposits, loans and advances and trade
and other receivables.
Financial assets are recognised at amortised cost when the Company's business model objective is to
collect the contractual cash flows of the assets and where these cash flows are SPPI on the principal
amount outstanding until maturity. Such assets are recognised when the Company becomes a party to
the contractual provisions of the instrument. The instruments are initially measured at fair value (see
note 3(d) below) and subsequently measured at amortised cost less ECL allowance. Interest is
recognised in the income statement in 'Interest income', using the EIR method as described below.
Transaction costs that are directly attributable to the acquisition of the financial asset are added to the
fair value on initial recognition. ECL and reversals thereof are recognised in the income statement in
'Net impairment loss on financial instruments'.
Financial liabilities classified at amortised cost include deposits and trade and other payables.
Financial liabilities are classified as being subsequently measured at amortised cost, except where they
are held for trading or are designated as measured at FVPL. They are recognised when the Company
becomes a party to the contractual provisions of the instrument and are initially measured at fair value
(see note 3(d) below) and subsequently measured at amortised cost. Interest is recognised in the income
statement in 'Interest expense' using the EIR method as described below. Transaction costs that are
directly attributable to the issue of a financial liability are deducted from the fair value on initial
recognition.
The EIR method is a method of calculating the amortised cost of a financial instrument (or a group of
financial instruments) and of allocating the interest income or interest expense over the expected life of
the financial instrument. The EIR is the rate that exactly discounts the estimated future cash payments
and receipts through the expected life of the financial instrument (or, where appropriate, a shorter
period) to the carrying amount of the financial instrument. The EIR is established on initial recognition
of the financial instrument. The calculation of the EIR includes all fees and commissions paid or
received, transaction costs, and discounts or premiums that are an integral part of the EIR.
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