Debt instruments (other than those wholly repayable or receivable within one year), including loans and other
accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently at
amortised cost using the effective interest method.
Debt instruments that are payable and receivable within one year, typically trade debtors and creditors, are measured,
initially and subsequently at the undiscounted amount of the cash or other consideration expected to be paid or
received. However, if the arrangements of a short-term instrument constitute a financing transaction, like the payment
of trade debt deferred beyond the normal business terms or financed at a rate of interest that is not a market rate or
in the case of an out-right short-term loan not at market rate, the financial asset or liability is measured, initially, at
the present value of the future cash flow discounted at a market rate of interest for a similar debt instrument and
subsequently at amortised cost.
Financial assets that are measured at cost and amortised costs are assessed at the end of each reporting period for
the objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in
the Profit and Loss Account.
For financial assets measured at amortised cost, the impairment loss is measured at the difference between an asset’s
carrying amount and the present value of estimated cash flows discounted at the asset’s original effective interest rate.
If a financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current
effective interest rate determined under the contract.