Page 153 - Pakistan Oilfield Limited - Annual Report 2022

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Annual Report 2022

(i) Simplified approach for trade debts
The Company recognises lifetime ECL on trade debts, using the simplified approach. The
measurement of ECL reflects:
- an unbiased and probability-weighted amount that is determined by evaluating a range
of possible outcomes;
- reasonable and supportable information that is available at the reporting date about past
events, current conditions and forecasts of future economic conditions.

Trade debts with individually significant balance are separately assessed for ECL measurement.
All other receivables are grouped and assessed collectively based on shared credit risk
characteristics and the days past due. The expected credit losses on these financial assets
are estimated based on the Company’s historical credit loss experience, adjusted for factors
that are specific to the debtors, general economic conditions and an assessment of both the
current as well as the forecast direction of conditions at the reporting date, including time
value of money where appropriate.
Where lifetime ECL is measured on a collective basis to cater for cases where evidence of
significant increases in credit risk at the individual instrument level may not yet be available,
the financial instruments are grouped on the following basis:
- Nature of financial instruments;
- Past-due status;
- Nature, size and industry of debtors; and
- External credit ratings where available.

The grouping is regularly reviewed by management to ensure that constituents of each
group continue to share similar credit risk characteristics.

Recognition of loss allowance
The Company recognizes an impairment gain or loss in the statement of profit or loss for all
financial instruments with a corresponding adjustment to their carrying amount through
a loss allowance account, except for investments in debt instruments that are measured
at FVTOCI, for which the loss allowance is recognised in other comprehensive income
and accumulated in the investment revaluation reserve, and does not reduce the carrying
amount of the financial asset in the statement of financial position.

Write-off
The Company writes off financial assets, in whole or in part, when it has exhausted all practical
recovery efforts and has concluded that there is no reasonable expectation of recovery. The
assessment of no reasonable expectation of recovery is based on unavailability of debtor’s
sources of income or assets to generate sufficient future cash flows to repay the amount.

The Company may write-off financial assets that are still subject to enforcement activity.
Subsequent recoveries of amounts previously written off will result in impairment gains.