The Group recognises a financial asset or a financial liability
when, and only when, it becomes a party to the contractual
provisions of the instrument.
Purchases or sales of financial assets that require delivery of
assets within the time frame generally established by regulation or
convention in the market place are recognised directly on the trade
date, i.e., the date that the Group commits to purchase or sell the
asset.
(iii) Initial measurement
Financial assets and liabilities at fair value through profit or
loss are recorded in the statement of financial position at fair
value. All transaction costs for such instruments are recognised
directly in profit or loss.
Derivatives embedded in other financial instruments are treated
as separate derivatives and recorded at fair value if their
economic characteristics and risks are not closely related to those
of the host contract, and the host contract is not itself
classified as held for trading or designated at fair value though
profit or loss. Embedded derivatives separated from the host are
carried at fair value.
Loans and receivables and financial liabilities (other than
those classified as held for trading) are measured initially at
their fair value plus any directly attributable incremental costs
of acquisition or issue.
(iv) Subsequent measurement
After initial measurement, the Group measures financial
instruments which are classified as at fair value through profit or
loss at fair value. Subsequent changes in the fair value of those
financial instruments are recorded in 'Net gain or loss on
financial assets and liabilities at fair value through profit or
loss'. Interest earned and dividend revenue elements of such
instruments are recorded separately in 'Interest revenue' and
'Dividend revenue', respectively. Dividend expenses related to
short positions are recognised in 'Dividends on securities sold not
yet purchased'.
AFRICA OPPORTUNITY FUND LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD 1 JANUARY 2013 THROUGH 30 JUNE 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial assets (Continued)
(iv) Subsequent measurement (continued)
Loans and receivables are carried at amortised cost using the
effective interest method less any allowance for impairment. Gains
and losses are recognised in profit or loss when the loans and
receivables are derecognised or impaired, as well as through the
amortisation process.
Financial liabilities, other than those classified as at fair
value through profit or loss, are measured at amortised cost using
the effective interest method. Gains and losses are recognised in
profit or loss when the liabilities are derecognised, as well as
through the amortisation process.
The effective interest method is a method of calculating the
amortised cost of a financial asset or a financial liability and of
allocating the interest income or interest expense over the
relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash payments or receipts
through the expected life of the financial instrument or, when
appropriate, a shorter period to the net carrying amount of the
financial asset or financial liability. When calculating the
effective interest rate, the Group estimates cash flows considering
all contractual terms of the financial instruments, but does not
consider future credit losses. The calculation includes all fees
paid or received between parties to the contract that are an
integral part of the effective interest rate, transaction costs and
all other premiums or discounts.
(v) Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is
derecognised where:
-- The rights to receive cash flows from the asset have expired;
or
-- The Group has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under a
'pass-through' arrangement; and
-- Either (a) the Group has transferred substantially all the
risks and rewards of the asset, or (b) the Group has neither
transferred nor retained substantially all the risks and rewards of
the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows
from an asset (or has entered into a pass-through arrangement), and
has neither transferred nor retained substantially all the risks
and rewards of the asset nor transferred control of the asset, the
asset is recognised to the extent of the Group's continuing
involvement in the asset.
The Group derecognises a financial liability when the obligation
under the liability is discharged, cancelled or expires.
AFRICA OPPORTUNITY FUND LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD 1 JANUARY 2013 THROUGH 30 JUNE 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Determination of fair value
Fair value is the amount for which an asset could be exchanged,
or a liability settled, between knowledgeable, willing parties in
an arm's length transaction.
The fair value for financial instruments traded in active
markets at the reporting date is based on their quoted price or
binding dealer price quotations, without any deduction for
transaction costs.
For all other financial instruments not traded in an active
market, the fair value is determined by using appropriate valuation
techniques. Valuation techniques include: using recent arm's length
market transactions; reference to the current market value of
another instrument that is substantially the same; discounted cash
flow analysis and option pricing models making as much use of
available and supportable market data as possible.
Impairment of financial assets
The Group assesses at each reporting date whether a financial
asset or group of financial assets classified as loans and
receivables is impaired. Evidence of impairment may include
indications that the debtor, or a group of debtors, is experiencing
significant financial difficulty, default or delinquency in
interest or principal payments, the probability that they will
enter bankruptcy or other financial reorganisation and, where
observable data indicate that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic
conditions that correlate with defaults.
If there is objective evidence that an impairment loss has been
incurred, the amount of the loss is measured as the difference
between the asset's carrying amount and the present value of
estimated future cash flows (excluding future expected credit
losses that have not yet been incurred) discounted using the
asset's original effective interest rate. The carrying amount of
the asset is reduced through the use of an allowance account and
the amount of the loss is recognised in profit or loss.
Impaired debts, together with the associated allowance, are
written off when there is no realistic prospect of future recovery
and all collateral has been realised or has been transferred to the
Group. If, in a subsequent period, the amount of the estimated
impairment loss increases or decreases because of an event
occurring after the impairment was recognised, the previously
recognised impairment loss is increased or reduced by adjusting the
allowance account. If a previous write-off is later recovered, the
recovery is credited to profit or loss.
Interest revenue on impaired financial assets is recognised
using the rate of interest used to discount the future cash flows
for the purpose of measuring the impairment loss.
AFRICA OPPORTUNITY FUND LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD 1 JANUARY 2013 THROUGH 30 JUNE 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Performance fee
The Special Limited Partners, under the terms of the Partnership
Agreement, are entitled to an aggregate annual carried interest
("Performance Allocation") from the Limited Partnership equivalent
to 20 per cent, of the excess of the Net Asset Value (as at 31
December in each year) after deducting the sum of (i) the annual
management fee for that year and (ii) a non compounding annual
hurdle amount equal to the Net Asset Value as at 31 December in the
previous year, as increased by the one year US Dollar LIBOR rate
(as derived from Bloomberg) calculated at the same date. The
Performance Allocation is subject to a "catch up" and a "high
watermark" requirement.
Offsetting financial instruments
Financial assets and financial liabilities are offset and the
net amount reported in the statement of financial position if, and
only if, there is a currently enforceable legal right to offset the
recognised amounts and there is an intention to settle on a net
basis, or to realise the asset and settle the liability
simultaneously.
Net gain or loss on financial assets and liabilities at fair
value through profit or loss
This item includes changes in the fair value of financial assets
and liabilities held for trading or designated upon initial
recognition as 'at fair value through profit or loss' and excludes
interest and dividend income and expenses.
Unrealised gains and losses comprise changes in the fair value
of financial instruments for the period and from reversal of prior
period's unrealised gains and losses for financial instruments
which were realised in the reporting period.
Realised gains and losses on disposals of financial instruments
classified as 'at fair value through profit or loss' are calculated
using the Average Cost (AVCO) method. They represent the difference
between an instrument's initial carrying amount and disposal
amount, or cash payments or receipts made on derivative contracts
(excluding payments or receipts on collateral margin accounts for
such instruments).
Due to and due from brokers
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