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
Initial recognition and measurement
All financial assets are recognised 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.
Subsequent measurement
For purposes of subsequent measurement, the company's assets are classified as:
- Investment at fair value through profit or loss; and
Investment at fair value through profit or loss
As the company's business is investing in financial assets with a view profiting from their total return in the form of income or capital gains, investments are designated as held at fair value through profit or loss on initial recognition. Financial assets at fair value through profit or loss are carried in the Statement of Financial Position at fair value. Gains and losses arising from investments designated as held at fair value through profit or loss are included in the Statement of Comprehensive Income in the year in which they arise.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest method, less impairment. This category generally applies to the company's debt investment, interest receivable and trade and other receivables.
Financial liabilities
The company's financial liabilities include trade and other payables. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.