Home' Slater and Gordon Annual Report : Slater and Gordon AR 2016 Contents Notes to the Financial Statements
For the Year Ended 30 June 2016
Slater and Gordon Limited
5.4 Financial Risk Management (continued)
5.4.1 Accounting Policies (continued)
Loans and receivables are non-interest bearing, non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. The loans are initially recognised based on fair value plus directly attributable
transactions costs and are subsequently stated at amortised cost using the effective interest rate method.
Financial assets are tested for impairment at each financial year end to establish whether there is any objective evidence
For loans and receivables carried at amortised cost, impairment 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 amount of the loss reduces the carrying
amount of the asset and is recognised in profit or loss. The impairment loss is reversed through profit or loss if the
amount of the impairment loss decreases in a subsequent period and the decrease can be related objectively to an event
occurring after the impairment was recognised.
Non-Derivative Financial Liabilities
Non-derivative financial liabilities include trade payables, other creditors and loans from third parties including loans from
or other amounts due to director-related entities.
Non-derivative financial liabilities are recognised at amortised cost, comprising original debt, net of directly attributable
transaction costs less principal payments and amortisation using the effective interest rate method.
Non-interest bearing financial liabilities for deferred cash consideration on the acquisition of acquired firms is measured
at amortised cost using the effective interest rate method. The implied interest expense is recognised in profit or loss.
Derivative Financial Instruments
The Group designates certain derivatives as either:
• hedges of fair value of recognised assets or liabilities or a firm commitment (fair value hedges); or
• Hedges of highly probable forecast transactions (cash flow hedges).
The Group currently has cash flow hedges only, relating to interest rate risk management. At the inception of the
transaction the relationship between hedging instruments and hedged items, as well as the Group’s risk management
objective and strategy for undertaking various hedge transactions are documented. It is the Group’s policy to hedge a
portion of its exposure in order to minimise the impact of an adverse change in interest rates that the Group is subject to.
Assessments, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging
transactions have been and will continue to be highly effective in offsetting changes in cash flow hedged items, are also
Cash Flow Hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is
recognised in other comprehensive income in the hedge reserve which forms part of equity. The gain or loss relating to
the ineffective portion is recognised immediately in the consolidated statement of profit or loss and other comprehensive
Amounts accumulated in the hedge reserve in equity are transferred to profit or loss in the periods when the hedged item
will affect profit or loss.
5.4 .2 Interest Rate Risk
The Group's exposure to interest rate risk and the effective interest rates of non-derivative financial assets and financial
liabilities both recognised and unrecognised at the end of the reporting period are as follows:
Variable interest rate
Fixed interest rate
Total financial assets
Other current liabilities
Finance lease liability
Bills of exchange
Total financial liabilities
78 Slater and Gordon Limited
Annual Report 2016
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