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notes tothe
financial statements
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STARHILL global reit ANNUAL REPORT FY 2016/17
3.8 Impairment
Non-derivative financial assets
A financial asset not carried at fair value through the statement of total return is assessed at each reporting date to
determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence
indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative
effect on the estimated future cash flows of that asset that can be estimated reliably.
Objective evidence that financial assets are impaired can include default or delinquency by a tenant, restructuring of
an amount due to the Group on terms that the Group would not consider otherwise, indications that a tenant or issuer
will enter bankruptcy. In addition, for an investment, a significant or prolonged decline in its fair value below its cost is
objective evidence of impairment.
Loans and receivables
The Group considers evidence of impairment for loans and receivables at both a specific asset and collective level. All
individually significant receivables are assessed for specific impairment. All individually significant receivables found not
to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified.
Loans and receivables that are not individually significant are collectively assessed for impairment by grouping together
loans and receivables with similar risk characteristics.
In assessing collective impairment, the Group uses historical trends of the probability of default, timing of recoveries and
the amount of loss incurred, adjusted for the Manager’s judgement as to whether current economic and credit conditions
are such that the actual losses are likely to be greater or less than suggested by historical trends.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between
its carrying amount, and the present value of the estimated future cash flows discounted at the asset’s original effective
interest rate. Losses are recognised in the statement of total return and reflected in an allowance account against loans
and receivables. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When
the Group considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written off.
If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, then the previously recognised impairment loss is reversed through the
statement of total return.
Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than investment properties, are reviewed at each
reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s
recoverable amount is estimated. For goodwill, the recoverable amount is estimated each year at the same time. An
impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit (“CGU”) exceeds its
estimated recoverable amount.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose
of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets
that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs.
Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has
been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill
is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs
that are expected to benefit from the synergies of the combination.
Impairment losses are recognised in the statement of total return. Impairment losses recognised in respect of CGUs are
allocated first to reduce the carrying amount of any goodwill allocated to the CGU (groups of CGUs) and then to reduce
the carrying amount of the other assets in the CGU (groups of CGUs) on a
pro rata
basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in
prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An
impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation, if no impairment loss had been recognised.