CITY DEVELOPMENTS LIMITED ANNUAL REPORT 2021 FINANCIALS 124 125 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2021 YEAR ENDED 31 DECEMBER 2021 2 BASIS OF PREPARATION (CONT’D) 2.5 Changes in account ing pol ices (cont ’d) Specific policies applicable from 1 January 2021 for interest rate benchmark reform The Phase 2 amendments provide practical relief from certain requirements in SFRS(I)s. These reliefs relate to modifications of financial instruments and lease contracts or hedging relationships triggered by a replacement of a benchmark interest rate in a contract with a new alternative benchmark rate. If the basis for determining the contractual cash flows of a financial asset or financial liability measured at amortised cost changes as a result of interest rate benchmark reform, then the Group updates the effective interest rate of the financial asset or financial liability to reflect the change that is required by the reform. A change in the basis for determining the contractual cash flows is required by interest rate benchmark reform if the following conditions are met: • the change is necessary as a direct consequence of the reform; and • the new basis for determining the contractual cash flows is economically equivalent to the previous basis - i.e. the basis immediately before the change. If changes aremade to a financial asset or financial liability in addition to changes to the basis for determining the contractual cash flows required by interest rate benchmark reform, then the Group first updates the effective interest rate of the financial asset or financial liability to reflect the change that is required by interest rate benchmark reform. Subsequently, the Group applies the policies on accounting for modifications to the additional changes. The amendments also provide an exception to use a revised discount rate that reflects the change in interest rate when remeasuring a lease liability because of a lease modification that is required by interest rate benchmark reform. Finally, the Phase 2 amendments provide a series of temporary exceptions from certain hedge accounting requirements when a change required by interest rate benchmark reform occurs to a hedged item and/or hedging instrument that permit the hedge relationship to be continued without interruption. The Group applies the following reliefs as and when uncertainty arising from interest rate benchmark reform is no longer present with respect to the timing and the amount of the interest rate benchmark-based cash flows of the hedged item or hedging instrument: • the Group amends the designation of a hedging relationship to reflect changes that are required by the reform without discontinuing the hedging relationship; and • when a hedged item in a cash flow hedge is amended to reflect the changes that are required by the reform, the amount accumulated in the cash flow hedge reserve is deemed to be based on the alternative benchmark rate on which the hedged future cash flows are determined. Where uncertainty persists in the timing or amount of the interest rate benchmark-based cash flows of the hedged item or hedging instrument, the Group continues to apply the existing accounting policies disclosed in note 3.6(vi). Related disclosures about risks, financial assets and financial liabilities indexed to inter-bank lending rates (IBOR) and hedge accounting are set out in note 41. 2 BASIS OF PREPARATION (CONT’D) 2.5 Changes in account ing pol ices (cont ’d) COVID-19 - Related rent concessions beyond 30 June 2021 (Amendment to SFRS(I) 16) The amendment to SFRS(I) 16, issued in March 2021, extends the practical expedient introduced by COVID-19-Related Rent Concessions (the 2020 amendments) by one year to allow lessees not to account for rent concessions as lease modifications if they occur as a direct consequence of COVID-19 and meet all of the following conditions: • the revised consideration is substantially the same as or less than the original consideration; • the reduction in lease payments relates to payments due on or before 30 June 2022; and • no other substantive changes have been made to the terms of the lease. The Group has elected to apply this practical expedient to all property leases. The application of the above amendments to standards and interpretations did not have a material effect on the financial statements. 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by Group entities, except as explained in note 2.5, which addresses changes in accounting policies. 3.1 Basis of consol idat ion (i) Business combinations The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the definition of a business and control is transferred to the Group. In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs. The Group has an option to apply a ‘concentration test’ that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The optional concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. Acquisitions from 1 January 2017 For acquisitions from 1 January 2017, the Group measures goodwill at the date of acquisition as: • the fair value of the consideration transferred; plus • the recognised amount of any non-controlling interests (NCI) in the acquiree; plus • if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree, over the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. Any goodwill that arises is tested annually for impairment.
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