AGRIBEL HOLDINGS LTD FINANCIAL REVIEW 2021
2.14 Derivative financial instruments Hedge accounting Derivative instruments ( assets and / or liabilities ) are used by the group in the management of business risks . They are initially recognised in the statement of financial position at cost ( which is the fair value on that date ) and are thereafter remeasured to fair value . The method of recognising the resultant profit or loss depends on the type of item being hedged . The group allocates certain financial instruments as :
A hedge of the exposure to changes in fair value of a recognised asset or liability or , an unrecognised firm commitment ( fair value hedge ); or A hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction ( cash flow hedge ).
Changes in the fair value of derivative instruments which have been allocated , and which qualify as fair value hedges , that are highly effective , are accounted for in profit or loss together with any change in the fair value of the hedged asset or liability that is attributable to the hedged risk , and are therefore effectively set off against one another . Changes in the fair value of derivative instruments which have been allocated and qualify as cash flow hedges , that are also highly effective , are accounted in other comprehensive income . The ineffective portion of a cash flow hedge is recognised immediately in profit and loss . If the forward transaction results in the recognition of an asset or liability , the profit or loss that was deferred earlier to other comprehensive income , is transferred from other comprehensive income and included in the initial determination of the cost of the asset or liability . Otherwise , amounts deferred to other comprehensive income are transferred to profit or loss and classified as revenue or expenditure during the same period when the hedged fixed commitment or forward transaction has an influence on profit or loss .
Changes in the fair value of any derivative instrument that do not qualify for hedge accounting with reference to IFRS 9 , are immediately recognised in profit or loss . If the hedging instrument lapses or is sold , or if the hedge no longer meets the criteria for hedge accounting , any cumulative profit or loss that exists at that point in other comprehensive income , is retained in other comprehensive income and recognised when the forward transaction is finally recognised in profit or loss . If it is expected that the forward transaction will no longer realise , the reported cumulative profit or loss is immediately transferred to profit or loss .
From the inception of the transaction , the group documents the relationship between the hedging instrument and the hedged item , as well as the risk management aim and strategy for entering into the hedging transaction . As part of this process , all derivative instruments are allocated as hedges to specific assets and liabilities or to specific fixed commitments or forward transactions . The group also documents valuations , both at the outset and continuously , in order to determine whether the derivative instrument being used in hedging transactions , is indeed highly effective to set-off the changes in fair value or cash flows of the hedged items .
Commodity term contracts ( futures ) The group participates in various future buying and selling contracts for the buying and selling of commodities . Although certain contracts are covered by the physical provision or delivery during normal business activities , future-contracts are regarded as a financial instrument . In terms of IFRS 9 Financial Instruments , it is recorded at fair value through profit and loss , where the group has a long history of net finalisation ( either with the other party or to participate in other off-setting
Refer to note 20 . Derivative and financial instruments where these instruments are disclosed .
2.15 Cash and short-term deposits Included in cash and short-term deposits , which form an integral part of cash management , are cash on hand and bank overdraft balances . Bank overdraft balances are stated as current liabilities . For the purposes of the statement of cash flows , cash and cash equivalents comprise of cash and short-term deposits as defined above , net of outstanding overdrafts .
2.16 Impairment of assets All categories of assets are assessed for impairment at each reporting date .
Agribel Holdings Limited Reg nr : 1996 / 017629 / 06 AGRIBEL ANNUAL FINANCIAL REVIEW 2021
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