Page 131 - Pakistan Oilfields Limited - Annual Report 2021

NOTES TO AND FORMING

PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED JUNE 30, 2021

4.18 Trade debts and other receivables

Trade receivables are amounts due from customers for services performed in the ordinary course of
business. If collection is expected in one year or less, they are classified as current assets. If not, they
are presented as non-current assets.

Trade receivables are recognised initially at the amount of consideration that is unconditional,
unless they contain significant financing components when they are recognised at fair value. They
are subsequently measured at amortised cost using the effective interest rate method, less loss
allowance. Refer note 4.21 for a description of the Company’s impairment policies.

4.19 Financial instruments

Financial assets and financial liabilities are recognised in the statement of financial position when
the Company becomes a party to the contractual provisions of the instrument. All the financial
assets are derecognized at the time when the Company loses control of the contractual rights
that comprise the financial assets. All financial liabilities are derecognized at the time when they
are extinguished that is, when the obligation specified in the contract is discharged, cancelled, or
expired. Any gains or losses on de-recognition of the financial assets and financial liabilities are
taken to the statement of profit or loss.

4.20 Financial assets

Classification

The Company classifies its financial assets in the following measurement categories:

(i) Amortised cost where the effective interest rate method will apply;

(ii) Fair value through profit or loss (FVTPL); and

(iii) Fair value through other comprehensive income (FVTOCI)

The classification depends on the entity’s business model for managing the financial assets and the
contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or other
comprehensive income (OCI). For investments in equity instruments that are not held for trading,
this will depend on whether the Company has made an irrevocable election at the time of initial
recognition to account for the equity investment at fair value through other comprehensive income
(FVTOCI).

The Company reclassifies debt investments when and only when its business model for managing
those assets changes.

Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which
the Company commits to purchase or sell the asset. Further, financial assets are derecognised when
the rights to receive cash flows from the financial assets have expired or have been transferred and
the Company has transferred substantially all the risks and rewards of ownership.

ANNUAL REPORT 2021 129