A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or  equity instrument of another entity. Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans  and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated  as hedging instruments in an effective hedge, as appropriate. All financial assets are recognized initially at fair  value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that  are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by  regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date  that the Group commits to purchase or sell the asset. The Group’s financial assets include cash and short-term deposits, trade and other receivables, loans and other  receivables, quoted and unquoted financial instruments and derivative financial instruments. For purposes of subsequent measurement financial assets are classified in four categories: Financial assets at fair value through profit or loss include financial assets held for trading and financial assets  designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for  trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including  separated embedded derivatives are also classified as held for trading unless they are designated as effective  hedging instruments as defined by IAS 39. Financial assets at fair value through profit and loss are carried in the statement of financial position at fair  value with net changes in fair value presented as other operating expenses (negative net changes in fair value)  or other operating income (positive net changes in fair value) in the statement of profit or loss. Financial assets at fair value through profit or loss l Financial assets at fair value through profit or loss l  Loans and receivables l  Held-to-maturity investments l  Available-for-sale financial investments Subsequent measurement Initial recognition and measurement Financial assets 2.  Basis of preparation and accounting policies (cont’d) 2.3  Summary of significant accounting policies (cont’d) (l)  Financial instruments – initial recognition and subsequent measurement NOTES TO THE CONSOLIDATED FINANCIAL  STATEMENTS  (RMB AND US$ AMOUNTS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)  China Yuchai International Limited | Annual Report 2013 49