Classification
Financial instruments are classified and accounted for according to the substance of the contractual arrangement, as
financial assets, financial liabilities or equity instruments. An equity instrument is any contract that evidences a
residual interest in the assets of the company after deducting all of its liabilities. Where shares are issued, any
component that creates a financial liability of the company is presented as a liability on the balance sheet. The
corresponding dividends relating to the liability component are charged as interest expenses in the profit and loss
account.
Recognition and measurement
All financial assets and liabilities are initially measured at transaction price (including transaction costs), except for
those financial assets classified as at fair value through profit or loss, which are initially measured at fair value (which
is normally the transaction price excluding transaction costs), unless the arrangement constitutes a financing
transaction. If an arrangement constitutes a financing transaction, the financial asset or financial liability is measured
at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.
Impairment
Assets, other than those measured at fair value, are assessed for indicators of impairment at each balance sheet date.
If there is objective evidence of impairment, an impairment loss is recognised in profit or loss as described below. A
non financial asset is impaired where there is objective evidence that, as a result of one or more events that occurred
after initial recognition, the estimated recoverable value of the asset has been reduced. The recoverable amount of an
asset is the higher of its fair value less costs to sell and its value in use. Where indicators exist for a decrease in
impairment loss, the prior impairment loss is tested to determine reversal. An impairment loss is reversed on an
individual impaired asset to the extent that the revised recoverable value does not lead to a revised carrying amount
higher than the carrying value had no impairment been recognised. For financial assets carried at amortised cost, the
amount of an impairment is the difference between the asset's carrying amount and the present value of estimated
future cash flows, discounted at the financial asset's original effective interest rate. For financial assets carried at cost
less impairment, the impairment loss is the difference between the asset's carrying amount and the best estimate of
the amount that would be received for the asset if it were to be sold at the reporting date. Where indicators exist for a
decrease in impairment loss, and the decrease can be related objectively to an event occurring after the impairment
was recognised, the prior impairment loss is tested to determine reversal. An impairment loss is reversed on an
individual impaired financial asset to the extent that the revised recoverable value does not lead to a revised carrying
amount higher than the carrying value had no impairment been recognised.