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Notes to the Consolidated Financial Statements

31st March 2015

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.11 Financial assets (continued)

2.11.2 Recognition and measurement

Regular way purchases and sales of financial assets are recognised on the trade-date – the
date on which the Group commits to purchase or sell the asset. Investments are initially
recognised at fair value plus transaction costs for all financial assets not carried at fair value
through profit or loss. Financial assets are derecognised when the rights to receive cash flows
from the investments have expired or have been transferred and the Group has transferred
substantially all risks and rewards of ownership. Loans and receivables are subsequently
carried at amortised cost using the effective interest method.

The Group assesses at the end of each reporting period whether there is objective evidence
that a financial asset or a group of financial assets is impaired. Impairment testing of loans
and receivables is described in Note 2.12.

2.12 Impairment of financial assets carried at amortised cost

The Group assesses at the end of each reporting period whether there is objective evidence that
a financial asset or group of financial assets is impaired. A financial asset or a group of financial
assets is impaired and impairment losses are incurred only if there is objective evidence of
impairment as a result of one or more events that occurred after the initial recognition of the asset
(a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of
the financial asset or group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is
experiencing significant financial difficulty, default or delinquency in interest or principal payments,
the probability that they will enter bankruptcy or other financial reorganisation, and where
observable data indicate that there is a measurable decrease in the estimated future cash flows,
such as changes in arrears or economic conditions that correlate with defaults.

For loans and receivables category, the amount of the loss is measured as the difference between
the asset’s carrying amount and the present value of estimated future cash flows (excluding future
credit losses that have not been incurred) discounted at the financial asset’s original effective
interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised
in the consolidated income statement. If a loan or held-to-maturity investment has a variable
interest rate, the discount rate for measuring any impairment loss is the current effective interest
rate determined under the contract. As a practical expedient, the group may measure impairment
on the basis of an instrument’s fair value using an observable market price.

46 ALCO HOLDINGS LIMITED ANNUAL REPORT 2015