Financial Translation [ 中文 ]

Issue No. 1A

Key requirements of HKFRS 9:

Original texts (Extracted from the announcement of a listed company on the website of HKEX)

All recognised financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and Measurement are subsequently measured at amortised cost or fair value.

Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent reporting periods.

Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are measured at fair value through other comprehensive income. All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. In addition, under HKFRS 9, entities may make an irrecoverable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

Re-phrased texts

Debt instruments are divided according to different business models. Where the debt instrument are held under a business model with the objective to collect the contracted cash flows which are solely the repayment of principal and interests on the principal outstanding, ¹ the debt instruments are in general measured at mortised cost at the end of the financial year and subsequent financial years.

Note [1]: it is better to use a conditional clause to substitute for the use of two adjective clauses for “a business model” in the original texts. That is, the business model (whose objective is … and that …).

Where the debt instruments are held under a business model that has the dual objective of collecting contracted cash flows and selling the financial assets ¹, with repayment of principal and interest on the principal outstanding on specified dates under the contract terms for the financial asset ², the debt instruments are measured at fair value through other comprehensive income. All other debt investments and equity investments are measured at fair value at the end of the financial year and subsequent financial years. In addition, HKFRS 9 provides that entities may make an irreversible selection to present subsequent changes in fair value of an equity investment (not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss accounts.

[1] The structure is a conditional clause “where …, the debt instrument…”.

[2] The structure “… held under a business model that has the dual objective ……, with the repayment of principal …” has an adjective clause (that has dual objective…) plus a phrase (with the repayment of principal…).

To be continued later at Issue No. 1B