/ 1 2 4
NOTES TO THE FINANCIAL STATEMENTS
C A M B R I D G E I N D U S T R I A L T R U S T
A N N U A L R E P O R T 2 0 1 5
3.
Significant accounting policies (Cont’d)
3.4 Financial instruments (Cont’d)
Derivative financial instruments and hedging activities
The Group holds derivative financial instruments to hedge its interest rate risk exposure. Embedded
derivatives are separated from the host contract and accounted for separately if the economic characteristics
and risks of the host contract and the embedded derivative are not closely related, a separate instrument
with the same terms as the embedded derivative would meet the definition of a derivative, and the
combined instrument is not measured at fair value through Statement of Total Return. Derivatives are not
used for trading purposes.
Derivatives are recognised initially at fair value; attributable transaction costs are recognised in the
Statement of Total Return when incurred. Subsequent to initial recognition, derivatives are measured at
fair value, and changes therein are recognised immediately in the Statement of Total Return.
Other non-trading derivatives
When a derivative financial instrument is not held for trading, and is not designated in a qualifying hedge
relationship, all changes in its fair value are recognised immediately in the Statement of Total Return.
Impairment of financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence
that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one
or more events have had a negative effect on the estimated future cash flows of that asset.
Objective evidence that financial assets (including equity securities) are impaired can include default or
delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not
consider otherwise, or indications that a debtor or issuer will enter bankruptcy, the disappearance of an
active market for a security.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference
between its carrying amount, and the present value of the estimated future cash flows discounted at the
original effective interest rate.
Individually significant financial assets are tested for impairment on an individual basis. The remaining
financial assets are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in the Statement of Total Return.
Impairment losses in respect of financial assets measured at amortised cost are reversed to the Statement
of Total Return, if the subsequent increase in fair value can be related objectively to an event occurring
after the impairment loss was recognised.
