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KUWAIT ENERGY plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 30 June 2014
18
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Interests in joint ventures (continued)
The aggregate of the Group’s share of profit or loss of a joint venture is shown on the face of the consolidated
income statement outside operating profit and represents profit or loss after tax and non-controlling interests in the
subsidiaries of the joint venture. The statement of profit or loss reflects the Group’s share of the results of operations
of the joint venture. Any change in Other Comprehensive Income (OCI) of those investees is presented as part of the
Group’s OCI. In addition, when there has been a change recognised directly in the equity of the joint venture, the
Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains
and losses resulting from transactions between the Group and the joint venture are eliminated to the extent of the
interest in the joint venture.
The financial statements of the joint venture are prepared for the same reporting period as the Group. When
necessary, adjustments are made to bring the accounting policies in line with those of the Group.
After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss
on its investment in its joint venture. At each reporting date, the Group determines whether there is objective
evidence that the investment in the joint venture is impaired. If there is such evidence, the Group calculates the
amount of impairment as the difference between the recoverable amount of the joint venture and its carrying value,
then recognises the loss as ‘impairment of investments’ in the statement of profit or loss.
Upon loss of joint control over the joint venture, the Group measures and recognises any retained investment at its
fair value. Any difference between the carrying amount of the joint venture upon loss of significant influence or joint
control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.
Financial assets
All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is
under a contract whose terms require delivery of the financial asset within the timeframe established by the market
concerned, and are initially measured at fair value, plus transaction costs that are directly attributable to the
acquisition of financial assets that are recorded at other than fair value through profit and loss.
Financial assets are classified as “cash and cash equivalents”, “trade and other receivables” and “held to maturity
investment”. The classification depends on the nature and purpose of the financial assets and is determined at the
time of initial recognition.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument 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 to the net carrying amount on initial recognition.
Cash and cash equivalents
Cash and cash equivalents in the consolidated statement of cash flows include cash, bank balances and short-term
deposits with an original maturity of three months or less.
Trade and other receivables
Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost
using the effective interest method, less any impairment. Interest income is recognised by applying the effective
interest rate, except for short-term receivables when the recognition of interest would be immaterial. Appropriate
allowances for estimated irrecoverable amounts are recognised in the consolidated statement of income when there is
objective evidence that the asset is impaired.
Held to maturity investments
Bonds with fixed or determinable payments and fixed maturity dates that the Group has the positive intent and
ability to hold to maturity are classified as held to maturity investment. Held to maturity investments are measured at
amortised cost using the effective interest method less any impairment, with revenue recognised on an effective yield
basis.
Impairment of financial assets