WEST AFRICA’S NEWEST LARGE GOLD PRODUCER Notes to the Consolidated Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued  (k)  Investments and other financial assets (continued) Impairment (l)  Derivatives and hedging activities (i)  Fair value hedges (ii) Cash flow hedges 52 For the year ended 30 June 2011 The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial  assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of  a security below its cost is considered an indicator in determining whether the security is impaired. If any such evidence exists for  available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair  value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from other comprehensive  income and recognised in the profit or loss.  Derivatives are initially recognised at fair value on the date a derivative contract is entered into and subsequently remeasured to their  fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative  is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as  either: At the inception of a hedge transaction, the Group formally designates and documents the hedge relationship between hedging  instruments and hedged items, as well as its risk management objective and strategy for undertaking the hedge. The Group also  documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging  transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedge items. The fair values of various derivative financial instruments used for hedging purposes are disclosed in note 15. Movements in the  hedging reserve in shareholders’ equity are shown in the statement of changes in equity. The full fair value of a hedging derivative is  classified as a Non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as  a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Where forward contracts are entered into and continue to be held for the purpose of receipt or delivery of a physical commodity  in accordance with expected purchase, sale or usage requirements, the contracts are outside of the scope of AASB 139 and are  therefore off balance sheet.  Changes in fair value of derivatives that are designated and qualify as fair value hedges are recorded in the comprehensive income  statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The  gain or loss relating to the effective portion of derivative contracts are recognised in the statement of comprehensive income  within “sale of goods” with a corresponding offsetting amount to the carrying amount of the asset or liability being the fair value  movement of the hedged asset or liability. The gain or loss relating to the ineffective portion is recognised immediately in the  statement of comprehensive income as other income or expense. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in  other comprehensive income and accumulated in reserves in equity. The gain or loss related to the ineffective portion is recognised  immediately in profit or loss within other income or expense. Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for  instance when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of derivative contracts  is recognised in the statement of comprehensive income within “sale of goods”. However when the forecast transaction that is  hedged results in the recognition of a non-financial asset (for example, inventory) or a non-financial liability, the gains and losses  previously deferred in equity are included in the measurement of the initial cost or carrying amount of the asset or liability. •  hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges); or •  hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly probable forecast  transactions (cash flow hedges). 