Maxis Berhad
Annual Report 2014
106
Notes to the
Financial Statements
31 December 2014
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h) Derivative financial instruments and hedging activities (continued)
Cash flow hedge
The Group and the Company use cash flow hedges to mitigate the risk of variability of future cash flows attributable to foreign
currency and/or interest rate fluctuations over the hedging period on the Group’s and the Company’s borrowings. Where a cash
flow hedge qualifies for hedge accounting, the effective portion of gains and losses on remeasuring the fair value of the hedging
instrument is recognised in other comprehensive income and accumulated in equity in the cash flow hedging reserve until such
time as the hedged items affect profit or loss, then the gains or losses are reclassified to the statement of profit or loss. Gains or
losses on any portion of the hedge determined to be ineffective are recognised immediately in the statement of profit or loss. The
application of hedge accounting will create some volatility in equity reserve balances.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting,
any cumulative gains or losses existing in equity at that time remain in equity and are recognised when the forecast transaction is
ultimately recognised in the statement of profit or loss. Where a forecast transaction is no longer expected to occur, the cumulative
gains or losses that were reported in equity are immediately reclassified to the statement of profit or loss.
(i) Fair value estimates
The fair value of the financial assets, financial liabilities and derivative financial instruments is estimated for recognition and
measurement or for disclosure purposes.
In assessing the fair value of financial instruments, the Group and the Company make certain assumptions and apply the estimated
discounted value of future cash flows to determine the fair value of financial instruments. The fair values of financial assets and
financial liabilities are estimated by discounting future cash flows at the current interest rate available to the respective companies.
The face values for financial assets and financial liabilities with a maturity of less than one year are assumed to be approximately
equal to their fair values.
For derivative financial instruments that are measured at fair value, the fair values are determined using a valuation technique
which utilises data from recognised financial information sources. Assumptions are based on market conditions existing at each
reporting date. The fair value is calculated as the present value of estimated future cash flow using an appropriate market-based
yield curve.
(j) Inventories
Inventories, which comprise telecommunications components, incidentals and devices, are stated at the lower of cost and net
realisable value. Cost includes the actual cost of materials and incidentals in bringing the inventories to their present location and
condition, and is determined on a weighted average basis. Net realisable value is the estimated selling price in the ordinary course
of business, less the estimated costs of completion and selling expenses.
