KU2020
3 . Summary of Accounting Policies ( continued )
Financial assets - Initial recognition and measurement At initial recognition , financial assets are classified and measured at fair value . Financial assets are subsequently measured in their entirety at either amortised cost or fair value , depending on the classification of the financial assets .
The classification of the financial assets at initial recognition depends on the financial asset ’ s contractual cash flow characteristics .
Financial assets subsequently measured at amortised cost Debt instruments are measured subsequently at amortised cost when the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and the contractual terms give rise to on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding ( SPPI ).
Financial assets designated at fair value through other comprehensive income ( FVTOCI ) Debt instruments are subsequently measured at fair value through profit or loss if the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding .
By default , all other financial assets are measured subsequently at fair value through profit or loss ( FVTPL ).
Despite the foregoing , the Company may make the following irrevocable election / designation at initial recognition of a financial asset :
1 ) The Company may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income if certain criteria are met ; and
2 ) The Company may irrevocably designate a debt investment that meets the amortised cost or FVTOCI criteria as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch .
Amortised cost and effective interest method The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period . Interest income is recognised in profit or loss and is included in the “ finance income - interest income ” line item .
The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments , plus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount , adjusted for any loss allowance . The gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any loss allowance .
Trade and other receivables Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method , less any allowance for expected credit losses . Trade receivables are generally due for settlement within 30 days .
De-recognition of Financial Assets The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire , or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party .
Impairment of trade and other receivables The Company has applied the simplified approach to measuring expected credit losses , which uses a lifetime expected loss allowance . To measure the expected credit losses , trade receivables have been grouped based on days overdue . The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument .
The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments , plus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount , adjusted for any loss allowance . The gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any loss allowance .
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