Page 197 - Pakistan Oilfields Limited - Annual Report 2021

NOTES TO AND FORMING

PART OF THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED JUNE 30, 2021

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 Group 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 Group 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 Group 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
Group has transferred substantially all the risks and rewards of ownership.

Measurement

At initial recognition, the Group 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 Group’s business model for
managing the asset and the cash flow characteristics of the asset. There are three measurement
categories into which the Group can classifies 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.

ANNUAL REPORT 2021 195