Page 152 - Pakistan Oilfield Limited - Annual Report 2022
P. 152

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             PAKISTAN OILFIELDS LIMITED
             Notes to and Forming Part of the

             Financial Statements


             For the year ended June 30, 2022



                      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.

             4.21     Impairment of financial assets
                      The Company assesses on a historical as well as on a forward looking basis the expected credit
                      losses (ECL) as associated with its trade debts, deposits and other receivables and cash and bank
                      balances carried at amortised cost. The impairment methodology applied depends on whether
                      there has been a significant increase in credit risk. For trade debts, the Company applies IFRS 9
                      simplified approach to measure the expected credit losses (loss allowance) which uses a lifetime
                      expected loss allowance while general 3-stage approach for deposits and other receivables and
                      cash and bank balances i.e to measure ECL through loss allowance at an amount equal to 12-month
                      ECL if credit risk on a financial instrument or a group of financial instruments has not increased
                      significantly since initial recognition.

                            Following are financial instruments that are subject to the ECL model:
                            - Trade debts
                            - Advances, deposits and other receivables
                            - Cash and bank balances
                            - Short term investments (if any)
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