# (III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

# 10. Financial instruments (Continued)

# 10.3 Impairment of financial assets (Continued)

# Impairment of financial assets measured at cost

If an impairment loss has been incurred on an investment in unquoted equity instrument (without a quoted price in an active market) whose fair value cannot be reliably measured, the carrying amount of the financial asset is reduced to the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. The amount of reduction is recognized as an impairment loss in profit or loss. The impairment loss on such financial asset is not reversed once it is recognized.

# 10.4 Transfer of financial assets

The Group derecognises a financial asset if one of the following conditions is satisfied: (1) the contractual rights to the cash flows from the financial asset expire; or (2) the financial asset has been transferred and substantially all the risks and rewards of ownership of the financial asset is transferred to the transferee; or (3) although the financial asset has been transferred, the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset but has not retained control of the financial asset.

For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, the difference between the carrying amount of the financial asset transferred and the sum of the consideration received from the transfer and any cumulative gain or loss that has been recognized in other comprehensive income, is recognized in profit or loss.

# 10.5 Classification, recognition and measurement of financial liabilities

On initial recognition, financial liabilities are classified into financial liabilities at fair value through profit or loss and other financial liabilities.

The Group’s financial liabilities are other financial liabilities, including notes payable, account payable, dividends payable and other payables.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with gain or loss arising from derecognition or amortisation recognized in profit or loss.

# 10.6 Derecognition of financial liabilities

The Group derecognises a financial liability (or part of it) only when the underlying present obligation (or part of it) is discharged. An agreement between the Group (an existing borrower) and an existing lender to replace the original financial liability with a new financial liability with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.

# (III) SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

# 10. Financial instruments (Continued)

# 10.6 Derecognition of financial liabilities (Continued)

When the Group derecognises a financial liability or a part of it, it recognises the difference between the carrying amount of the financial liability (or part of the financial liability) derecognized and the consideration paid (including any non-cash assets transferred or new financial liabilities assumed) in profit or loss.

# 10.7O ffsetting financial assets and financial liabilities

Where the Group has a legal right that is currently enforceable to set off the recognized financial assets and financial liabilities, and intends either to settle on a net basis, or to realise the financial asset and settle the financial liability simultaneously, a financial asset and a financial liability shall be offset and the net amount is presented in the balance sheet. Except for the above circumstances, financial assets and financial liabilities shall be presented separately in the balance sheet and shall not be offset.

# 10.8 Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The issuance of equity instruments is deemed as changes in equity. The Group does not recognise any changes in the fair value of equity instruments. Transaction fees relevant to equity transactions are deducted from equity.

Distributions made by the Group to holders of equity instruments are treated as profit distributions.

# 11. Receivables

# 11.1 Receivables that are individually significant and for which bad debt provision is individually assessed

<table><tr><td>Criteria for determining 
receivables that are individually 
significant</td><td>A receivable that exceeds RMB5 million is deemed as an 
individually significant receivable by the Group.</td></tr><tr><td>Method of determining 
provision for receivables that 
are individually significant</td><td>For receivables that are individually significant, the Group 
assesses the receivables individually for impairment. For 
a financial asset that is not impaired individually, the 
Group includes the asset in a group of financial assets 
with similar credit risk characteristics and collectively 
assesses them for impairment. Receivables for which 
an impairment loss is individually recognized are not 
included in a collective assessment of impairment.</td></tr></table>