45
2013
CPC
An impairment loss is recognized when there is objective evidence that the financial asset is impaired.
Any subsequent decrease in impairment loss on an equity instrument classified as available-for-
sale is recognized directly in equity. If the fair value of a debt instrument classified as available-for-
sale increases as a result of an event which occurred after the impairment loss was recognized, the
decrease in impairment loss is reversed to profit.
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Hedging Derivative Financial Instruments
Derivatives that qualify as effective hedging instruments are measured at fair value, with subsequent
changes in fair value recognized either in profit or loss, or in shareholders’ equity, depending on the
nature of the hedging relationship.
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Revenue Recognition, Trade Receivables and Allowance for Doubtful
Accounts
Revenue from sales of goods is recognized when the Corporation has transferred to the customer the
significant risks and rewards of ownership of the goods, primarily upon shipment, because the earnings
process has been completed and the economic benefits associated with the transaction have been
realized or are realizable.
Revenue is measured at the fair value of the consideration received or receivable and represents
amounts agreed between the Corporation and the customers for goods sold in the normal course of
business, net of sales discounts and volume rebates. For trade receivables due within one year from
the balance sheet date, as the nominal value of the consideration to be received approximates its fair
value and transactions are frequent, fair value of the consideration is not determined by discounting all
future receipts using an imputed rate of interest.
An allowance for doubtful accounts is provided on the basis of a review of the collectibility of accounts
receivable. The Corporation makes this review by an aging analysis of the outstanding receivables
and assessing the value of the collaterals provided by customers. Accounts receivable that have been
outstanding for more than six month are reclassified to overdue receivables.
As discussed in Note 4 to the financial statements, on January 1, 2011, the Corporation adopted the
third-time revised Statement of Financial Accounting Standards (SFAS) No. 34, “Financial Instruments:
Recognition and Measurement.” One of the main revisions is that the impairment of receivables
originated by the Corporation should be covered by SFAS No. 34. Accounts receivable are assessed
for impairment at the end of each reporting period and considered to be impaired when there is objective
evidence that, as a result of one or more events that occurred after the initial recognition of the accounts
receivable, the estimated future cash flows of the asset have been affected. Objective evidence of
impairment could include:
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Significant financial difficulty of the debtor;
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Accounts receivable becoming overdue; or
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It becoming probable that the debtor will enter into bankruptcy or undergo financial reorganization.
Accounts receivable that are assessed not to be impaired individually are further assessed for
impairment on a collective basis. Objective evidence of impairment for a portfolio of accounts receivable
could include the Corporation’s past experience of collecting payments and an increase in the number
of delayed payments, as well as observable changes in national or local economic conditions that
correlate with defaults on receivables.
The amount of the impairment loss recognized is the difference between the asset carrying amount and
the present value of estimated future cash flows, after taking into account the related collaterals and
guarantees, discounted at the receivable’s original effective interest rate.
The carrying amount of the accounts receivable is reduced through the use of an allowance account.
When accounts receivable are considered uncollectible, they are written off against the allowance
account. Recoveries of amounts previously written off are credited to the allowance account. Changes
in the carrying amount of the allowance account are recognized as bad debt in profit or loss.
