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28 | NEUROLOGICAL FOUNDATION instrument. Financial instruments are recognised initially at fair value plus transaction costs, except for those carried at fair value through surplus or deficit, which are measured at fair value. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or the Foundation transfers the financial asset to another party without retaining control or substantial all risks and rewards of the asset. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Investments in Managed Funds are classified as current assets based on the National Council's expectation that they can be realised within 12 months if required. Purchases or sales of financial assets are recognised and rerecognised using trade date accounting. Subsequent to initial recognition, financial instruments are measured as described below. Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Foundation's cash and cash equivalents, trade and most other receivables fall into this category of financial instruments. Held-to-maturity investments Held-to-maturity investments are financial assets with fixed or determinable payments and fixed maturity other than loans and receivables. Investments are classified as held-to-maturity if the Foundation have the intention and ability to hold them until maturity. The Foundation currently hold bonds designated into this category. Held-to-maturity investments are measured subsequently at amortised cost using the effective interest method. If there is objective evidence that the investment is impaired, determined by reference to external credit ratings, the financial asset is measured at the present value of estimated future cash flows. Any changes to the carrying amount of the investment, including impairment losses, are recognised in the reported surplus or deficit. Financial assets at fair value through surplus or deficit A financial instrument is classified as fair value through surplus or deficit if it is held-for-trading or designated at initial recognition. A financial instrument is subclassified as held- for-trading if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term or, on initial recognition, it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit- taking or it is a derivative where hedge accounting is not applied. Those fair value through surplus or deficit instruments sub-classified as held-for- trading comprise forward exchange contracts and investment funds managed by New Zealand Asset Management (NZAM), Aspiring Fund and Milford Asset Management. Financial instruments are sub-classified as designated at initial recognition if the group of assets are managed and its performance evaluated on a fair value basis, in accordance with the Foundations documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity's key management personnel. The Members of Council review and approve by resolution the management of investments on a fair value basis as investments are held for allocation to future projects. Those fair value through surplus or deficit instruments sub-classified as designated at initial recognition comprise investment funds managed by Trust Management, Mercury Capital Fund 3, Continuity Capital Private Equity Fund No.4 LP and Waterman Fund. Financial instruments classified as fair value through surplus or deficit are subsequently measured at fair value with gains or losses being recognised in surplus or deficit. Fair values are determined by reference to active market transactions. Available-for-sale financial assets Available-for-sale financial assets are financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. The Foundation has no financial assets designated as available-for-sale financial assets. Equity investments are measured at cost less any impairment charges, where the fair value cannot currently be estimated reliably. All other available-for-sale financial assets are measured at fair value. Gains and losses are recognised in other comprehensive income and reported within the “available-for-sale reserve” within equity, except for impairment losses and foreign exchange differences on monetary assets, which are recognised in the reported surplus or deficit. IMPAIRMENT All financial assets are assessed for impairment at each reporting date. Where the carrying amount is assessed to be greater than its recoverable amount, the item is written down. The write down is recognised in the Statement of comprehensive revenue and expense.