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Annual Report 2015
3 SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
3.6 Financial instruments (cont’d)
Derivative financial instruments, including hedge accounting
Derivative financial instruments are held to hedge foreign currency and interest rate risk exposures. Embedded
derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks
of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms
as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at
fair value through the statement of total return.
On initial designation of the hedge, the relationship between the hedging instrument(s) and hedged item(s) is formally
documented, including the risk management objectives and strategy in undertaking the hedge transaction, together
with the methods that will be used to assess the effectiveness of the hedging relationship. An assessment is made,
both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are
expected to be "highly effective" in offsetting the changes in the fair value or cash flows of the respective hedged items
during the period for which the hedge is designated, and whether the actual results of each hedge are within a range
of 80% - 125%. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and
should present an exposure to variations in cash flows that could ultimately affect reported net income.
Derivatives are recognised initially at fair value; attributable transaction costs are recognised in the statement of total
return when incurred. Subsequent to initial recognition, derivatives are measured at fair value. The gain or loss on
re-measurement to fair value is recognised immediately in the statement of total return. However, where derivatives
qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged.
Cash flow hedges
Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised directly
in unitholders’ funds to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair
value are recognised in the statement of total return.
When the hedged item is a non-financial asset, the amount recognised in unitholders’ funds is transferred to the carrying
amount of the asset when it is recognised. In other cases, the amount recognised in unitholders’ funds is transferred to
the statement of total return in the same period that the hedged item affects the total return.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised,
hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in unitholders’ funds
remains there until the forecast transaction occurs.
3.7 Inventories
Inventories comprise mainly food, beverage stocks and consumables.
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is calculated using the
weighted average cost formula.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of
completion and selling costs.
NOTES TO THE FINANCIAL STATEMENTS
