Page 93 - China Mobile Limited - Annual Report 2012

China Mobile Limited
Annual Report 2012
87
Notes to the Financial Statements
(Expressed in Renminbi unless otherwise indicated)
1 Significant Accounting Policies (Continued)
(j) Impairment of assets
(i) Impairment of investments in equity securities and receivables
Investments in equity securities (other than investments in subsidiaries) and receivables that are stated at
cost or amortized cost are reviewed at the end of each reporting date to determine whether there is
objective evidence of impairment. Objective evidence of impairment includes observable data that comes
to the attention of the Group about one or more of the following loss events:
– significant financial difficulty of the debtor;
– a breach of contract, such as a default or delinquency in interest or principal payments;
– it becoming probable that the debtor will enter bankruptcy or other financial reorganization;
– significant changes in the technological, market, economic or legal environment that have an adverse
effect on the debtor; and
– a significant or prolonged decline in the fair value of an investment in an equity instrument below its
cost.
If any such evidence exists, any impairment loss is determined and recognized as follows:
– For investments in associates and jointly controlled entities recognized using the equity method (see
note 1(d)), the impairment loss is measured by comparing the recoverable amount of the investment
with its carrying amount in accordance with note 1(j)(ii). The impairment loss is reversed if there has
been a favourable change in the estimates used to determine the recoverable amount in accordance
with note 1(j)(ii).
– For unquoted equity securities carried at cost, the impairment loss is measured as the difference
between the carrying amount of the financial asset and the estimated future cash flows, discounted
at the current market rate of return for a similar financial asset where the effect of discounting is
material. Impairment losses for equity securities are not reversed (see note 1(j)(ii)).
– For trade and other current receivables and other financial assets carried at amortized cost, the
impairment loss is measured as the difference between the asset’s carrying amount and the present
value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e.
the effective interest rate computed at initial recognition of these assets), where the effect of
discounting is material. This assessment is made collectively where these financial assets share
similar risk characteristics, such as similar past due status, and have not been individually assessed
as impaired. Future cash flows for financial assets which are assessed for impairment collectively are
based on historical loss experience for assets with credit risk characteristics similar to the collective
group.