Page 89 - Sundance Resources Ltd Annual Report 2013

SUNDANCE RESOURCES LIMITED ANNUAL REPORT 2013 87
NOTES TO THE
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2013
g) Cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments
that are readily convertible to known amounts of cash, which are subject to an insignificant risk of changes in
value and have a maturity of three months or less at the date of acquisition.
h) Financial assets
Investments are recognised and derecognised on trade date where the purchase or sale of an investment is
under a contract whose terms require delivery of the investment within the timeframe established by the market
concerned, and are initially measured at fair value, net of transaction costs.
Subsequent to initial recognition, investments in subsidiaries are measured at cost in the company financial
statements.
Other financial assets are classified as ‘loans and receivables’. The classification depends on the nature and
purpose of the financial assets and is determined at the time of initial recognition.
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in
an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised
cost using the effective interest method less impairment.
Interest income is recognised by applying the effective interest rate, except for short-term receivables when the
recognition of interest would be immaterial.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash receipts (including all fees on points paid or received that form an integral part of the effective interest
rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or,
where appropriate, a shorter period.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are
impaired where there is objective evidence that as a result of one or more events that occurred after the initial
recognition of the financial asset the estimated future cash flows of the investment have been impacted.
For financial assets carried at amortised cost, the amount of the impairment is the difference between the
asset’s carrying amount and the present value of estimated future cash flows, discounted at the original
effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with
the exception of trade receivables, where the carrying amount is reduced through the use of an allowance
account. When a trade receivable is considered uncollectable, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited against the allowance account.
Changes in the carrying amount of the allowance account are recognised in profit or loss.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset
to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership
and continues to control the transferred asset, the Group recognises its retained interest in the asset and an
associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards
of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also
recognises a collateralised borrowing for the proceeds received.
Note 2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Critical accounting judgements and the key sources
of estimation uncertainty (continued)