Year ended 31 December 2014
12
Please refer also to Note 39 for further fair value disclosures.
Derecognition A financial liability is derecognised from the balance
sheet when the obligation specified in the contract is discharged, cancelled or expired.
2.15 Loan commitments, Letters of credit and
Financial guarantees Loan commitments
Loan commitments are typically not financial instruments and are not recognised on the balance
sheet. They are disclosed in accordance with FRS 37 and form part of the disclosures in Note 35. Upon a
loan draw-down, the amount of the loan is accounted
for under “loans and receivables” as described in Note 2.8.
Letters of credit Letters of credit are recorded off-balance sheet as
contingent liabilities upon issuance, and the corresponding payables to the beneficiaries and
receivables from the applicants are recognised on- balance sheet upon acceptance of the underlying
documents. Financial guarantees
A financial guarantee is initially recognised in the financial statements at fair value on the date the
guarantee is given. This is generally the amount fee paid by the counterparty. Subsequently, the fee is
recognised over time as income in accordance with the principles in Note 2.7.
Off-balance sheet credit exposures are managed for credit risk in the same manner as financial assets.
Please refer to Note 2.10 on the Group’s accounting policies on specific allowances for credit losses.
2.16 Provisions and other liabilities Provisions for other liabilities of uncertain timing and
amounts are recognised when:
the Group has a present legal or constructive
obligation as a result of past events;
it is probable that an outflow of resources embodying economic benefits will be required to
settle the obligation; and
a reliable estimate of the amount of the obligation can be made.
The amount recognised as a provision is the best estimate of the expenditure required to settle the
present obligation at the balance sheet date.
2.17 Share capital and other instruments classified as equity
Ordinary shares, preference shares and other instruments which do not result in the Group having a
contractual obligation to deliver cash or another financial asset, or to exchange financial assets or
financial liabilities with the holder under conditions that are potentially unfavourable to the Group, are classified
as equity. Distributions arising from such instruments are recognised in equity as there is no contractual
obligation to pay distributions on these instruments. Incremental external costs directly attributable to the
issuance of such instruments are accounted for as a deduction from equity.
For ordinary and preference shares, interim dividends are recorded during the financial year in which they are
declared payable. Final dividends are recorded during the financial year in which the dividends are approved
by the Board of Directors. D Other Specific Topics
2.18 Hedging and hedge accounting The Group uses derivative contracts mainly as part of
