Page 132 - Pakistan Oilfields Limited - Annual Report 2021

NOTES TO AND FORMING

PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED JUNE 30, 2021

Measurement

At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a
financial asset not at FVTPL, transaction costs that are directly attributable to the acquisition of the
financial asset. Transaction costs of financial assets carried at FVTPL are expensed in statement of
profit or loss.

Debt instruments
Subsequent measurement of debt instruments depends on the Company’s business model for
managing the asset and the cash flow characteristics of the asset. There are three measurement
categories into which the Company can classify its debt instruments:
a) Amortised cost

Financial assets that are held for collection of contractual cash flows where the contractual terms
of the financial assets give rise on specified dates to cash flows that represent solely payments of
principal and interest, are measured at amortised cost. Interest income from these financial assets
is included in other income using the effective interest rate method. Any gain or loss arising on
derecognition is recognised directly in profit or loss and presented in other income together with
foreign exchange gains and losses. Impairment losses are presented as separate line item in the
statement of profit or loss.

b) Fair value through other comprehensive income (FVTOCI)

Assets that are held for collection of contractual cash flows and for selling the financial assets,
where the contractual terms of the financial asset give rise on specified dates to cash flows that
represent solely payments of principal and interest, are measured at FVTOCI. Movements in the
carrying amount are taken through OCI, except for the recognition of impairment gains or losses
and interest revenue, and foreign exchange gains and losses which are recognised in profit or
loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised
in OCI is reclassified from equity to statement of profit or loss and recognised in other income.
Interest income from these financial assets is included in other income using the effective interest
rate method. Foreign exchange gains and losses are presented in other income and impairment
expenses are presented as separate line item in the statement of profit or loss.

c) Fair value through profit or loss (FVTPL)

Assets that do not meet the criteria for amortised cost or FVTOCI are measured at FVTPL. A gain or
loss on a debt investment that is subsequently measured at FVTPL is recognised in profit or loss and
presented net within other income in the period in which it arises.

Equity instruments
The Company subsequently measures all equity investments at fair value. Where the Company’s
management has elected to present fair value gains and losses on equity investments in OCI,
there is no subsequent reclassification of fair value gains and losses to profit or loss following the
derecognition of the investment. Dividends from such investments continue to be recognised in
profit or loss as other income when the Company’s right to receive payments is established.

Changes in the fair value of financial assets at FVTPL are recognised in statement of profit or loss.

130 PAKISTAN OILFIELDS LIMITED