2.12 Impairment of non-fi nancial assets Goodwill
An impairment loss is recognised when the carrying amount of a CGU, including the goodwill, exceeds the recoverable amount
of the CGU. Recoverable amount of a CGU is the higher of the CGU’s fair value less cost to sell and its value-in-use.
An impairment loss on goodwill recognised in the income statement cannot be reversed in subsequent periods.
Properties and other fi xed assets, and investment in subsidiaries, associates and joint ventures
Properties including investment properties and other fi xed assets, and investment in subsidiaries, associates and joint
ventures are reviewed for impairment at each balance sheet date to determine if events or changes in circumstances
indicate that the carrying value may not be recoverable. If such an indication exists, the carrying value of the asset is written
down to its recoverable amount being the higher of the fair value less cost to sell and the value-in-use. The impairment loss
is charged to the income statement.
2.13 Financial liabilities The Group classifi es its fi nancial liabilities in the following
categories: a fi nancial liabilities at fair value through profi t or loss; and b fi nancial liabilities at amortised cost.
Financial liabilities are classifi ed as fi nancial liabilities at fair value through profi t or loss if they are incurred for the purpose
of short-term repurchasing held for trading or designated by management on initial recognition designated under the fair
value option.
Derivatives are classifi ed as held for trading unless they are designated as hedging instruments. The specifi c Group
accounting policy on derivatives is detailed in Note 2.15.
Financial liabilities designated under the fair value option meet at least one of the following criteria upon designation:
• it eliminates or signifi cantly reduces measurement or
recognition inconsistencies that would otherwise arise from measuring fi nancial liabilities, or recognising gains or losses
on them, using different bases; or
• the fi nancial liability contains an embedded derivative that
would otherwise need to be separately recorded. Financial liabilities are initially recognised at fair value, net of
transaction costs incurred, except for fi nancial liabilities at fair value through profi t or loss, for which transaction costs are
expensed off immediately. Financial liabilities classifi ed as fair value through profi t or loss
are subsequently carried at fair value. Realised or unrealised gains or losses on fi nancial liabilities held for trading and
fi nancial liabilities designated under the fair value option, except interest expense, are taken to “Net trading income” and
“Net income from fi nancial instruments designated at fair value” respectively in the income statement in the period they
arise. All other fi nancial liabilities are subsequently carried at amortised cost using the effective interest method.
The fair value of fi nancial liabilities is estimated by discounting the future contractual cash fl ows at the current market interest
rate that is available to the Group for similar fi nancial instruments. Where applicable, a valuation reserve or pricing
adjustment is applied to arrive at the fair value.
A fi nancial liability is removed or derecognised from the balance sheet when the obligation specifi ed in the contract is
discharged, cancelled or expired.
2.14 Provisions and other liabilities Provisions are recognised when the Group has a present legal
or constructive obligation as a result of past events, it is probable that an outfl ow of resources embodying economic
benefi ts 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.
2.15 Derivative fi nancial instruments and hedge
accounting Derivatives are initially recognised at fair value at the date on
which a derivative contract is entered into and are subsequently remeasured at fair value. All derivatives are classifi ed as assets
when the fair value is positive Positive fair values for fi nancial derivatives and as liabilities when the fair value is negative
Negative fair values for fi nancial derivatives.
Changes in the fair value of derivatives other than those designated as fair value hedges, cash fl ow hedges or net
investments in foreign operations hedges are included in “Net trading income”.
Certain derivatives embedded in other fi nancial instruments are treated as separate derivatives when their economic
characteristics and risks are not closely related to those of the host contract and the host contract is not carried at fair value
through profi t or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in
“Net trading income”.
For fi nancial instruments designated as hedging instruments, each entity within the Group documents at the inception the
relationship between the hedging instrument and hedged item, including the risk management objective for undertaking
various hedge transactions and methods used to assess the effectiveness of the hedge. Each entity within the Group also
documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivative is highly effective
in offsetting changes in the fair value or cash fl ows of the hedged item.
Fair value hedge For a qualifying fair value hedge, the changes in the fair value
of the hedging derivatives are recorded in the income statement, together with any changes in the fair value of the
hedged item attributable to the hedged risk. Gain or loss arising from hedge ineffectiveness is recognised in the income
statement.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item is
amortised to the income statement over its remaining maturity, using the effective interest method.
Cash fl ow hedge The effective portion of changes in the fair value of a derivative
designated and qualifying as a hedge of future cash fl ows is recognised in other comprehensive income and accumulated
under the cash fl ow hedge reserve in equity, and reclassifi ed to the income statement in the periods when the hedged item
affects profi t or loss. The ineffective portion of the gain or loss is recognised immediately in the income statement under “Net
trading income”.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss existing in the cash fl ow hedge reserve remains until the forecast transaction is ultimately recognised in
the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss in the cash fl ow
hedge reserve is reclassifi ed from equity to profi t or loss.
Hedge of net investment in a foreign operation Hedges of net investments in the Group’s foreign operations
are accounted for in a manner similar to cash fl ow hedges. The gain or loss from the derivative relating to the effective portion
of the hedge is recognised in other comprehensive income and accumulated under the capital reserve in equity. The gain or
loss relating to the ineffective portion of the hedge is recognised immediately in the income statement under “Net
trading income”. On disposal of the foreign operations, the cumulative gain or loss in the capital reserve is reclassifi ed to
profi t or loss under “Net trading income”.
2.16 Employee benefi ts Employee benefi ts, which include base pay, cash bonuses,