Annual Report 2019

Explanatory Notes 30 SEPTEMBER 2019 2. ACCOUNTING POLICIES (CONT’D) 2.3 Basis of consolidation (cont’d) A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it: • Derecognises the assets (including goodwill) and liabilities of the subsidiary • Derecognises the carrying amount of any non-controlling interest • Derecognises the cumulative translation differences, recorded in equity • Recognises the fair value of the consideration received • Recognises the fair value of any investment retained • Recognises any surplus or deficit in profit or loss • Reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss or retained earnings as appropriate. 2.4 Changes in accounting policies and disclosures New and amended standards and interpretation The Group applied for the first time certain standards and amendments, which are effective for annual periods beginning on or after 1 October 2018. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. The nature and the effect of these changes are disclosed below. IFRS 9 - Financial Instruments IFRS 9 Financial Instruments was issued in July 2014 and has an effective date of 1 January 2018. IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement, introducing new requirements for the classification and measurement of financial instruments, the recognition and measurement of credit impairment provisions, and providing for a simplified approach to hedge accounting. The changes in measurement arising on initial application of IFRS 9 have been incorporated through an adjustment to the opening reserves and retained earnings position as at 1 October 2018. Although IFRS 9 has been retrospectively applied, the Group is only permitted to restate comparatives if, and only if, it is possible without the use of hindsight. The Group does not consider it possible to restate comparatives for impairment without the use of hindsight. The Group applied the new rules from 1 October 2018, however, comparatives for previous years have not been restated. Changes to classification and measurement To determine the classification and measurement category, IFRS 9 requires all financial assets, except equity instruments and derivatives, to be assessed based on a combination of the Group’s business model for managing the assets and the instruments’ contractual cash flow characteristics. The IAS 39 measurement categories of financial assets (fair value through profit or loss (FVTPL), available for sale (AFS), held-to-maturity (at amortised cost) have been replaced by: • Debt instruments at amortised cost; • Debt instruments at fair value through other comprehensive income (FVTOCI), with gains or losses recycled to profit or loss on derecognition; • Equity instruments at FVTOCI, with no recycling of gains or losses to profit or loss on derecognition; and • Financial assets at FVTPL. Under IFRS 9, embedded derivatives are no longer separated from a host financial asset. Instead, financial assets are classified based on business model and their contractual terms. The accounting for derivatives embedded in financial liabilities and in non-financial host contracts has not changed. The accounting for financial liabilities remains largely the same as it was under IAS 39, except for the treatment of gains or losses arising from an entity’s own credit risk relating to liabilities designated at FVTPL. Such movements are presented in OCI with no subsequent reclassification to the income statement. The Group’s cash and bank balances, deposits with banks, loans and advances, government bonds, clearing accounts and other receivables are held to collect contractual cash flows and give rise to cash flows representing solely payments of principal and interest. The Group analysed the contractual cash flow characteristics of those instruments and concluded that they meet the criteria for amortised cost measurement under IFRS, therefore those financial instruments continue to be measured at amortised cost. CIM FINANCIAL SERVICES LTD / ANNUAL REPORT 2019 73