In the case of equity investments classified as AFS, objective evidence would include a significant or prolonged  decline in the fair value of the investment below its cost. ‘Significant’ is evaluated against the original cost of the  investment and ‘prolonged’ against the period in which the fair value has been below its original cost. When  there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost  and the current fair value, less any impairment loss on that investment previously recognized in the statement  of profit or loss – is removed from OCI and recognized in the statement of profit or loss. Impairment losses on  equity investments are not reversed through profit or loss; increases in their fair value after impairment are  recognized in OCI. In the case of debt instruments classified as AFS, the impairment is assessed based on the same criteria as  financial assets carried at amortized cost. However, the amount recorded for impairment is the cumulative loss  measured as the difference between the amortized cost and the current fair value, less any impairment loss on  that investment previously recognized in the statement of profit or loss. Future interest income continues to be accrued based on the reduced carrying amount of the asset, using  the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.  The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt  instrument increases and the increase can be objectively related to an event occurring after the impairment  loss was recognized in the statement of profit or loss, the impairment loss is reversed through the statement of  profit or loss. Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss,  loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as  appropriate. All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables,  net of directly attributable transaction costs. The Group’s financial liabilities include trade and other payables, loans and borrowings, financial guarantee  contracts, and derivative financial instruments. China Yuchai International Limited | Annual Report 2013 53 Initial recognition and measurement Financial liabilities 2.  Basis of preparation and accounting policies (cont’d) 2.3  Summary of significant accounting policies (cont’d) AFS financial investments (cont’d) Impairment of financial assets (cont’d) (l)  Financial instruments – initial recognition and subsequent measurement (cont’d) NOTES TO THE CONSOLIDATED FINANCIAL  STATEMENTS  (RMB AND US$ AMOUNTS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA) 