Page 155 - Pakistan Oilfield Limited - Annual Report 2022

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Annual Report 2022

Irrespective of the above analysis, in case of trade debts, the Company considers that
default has occurred when the debt is more than 365 days past due, unless the Company
has reasonable and supportable information to demonstrate that a more lagging default
criterion is more appropriate.
Credit - impaired financial assets

A financial asset is credit-impaired when one or more events that have a detrimental impact
on the estimated future cash flows of that financial asset have occurred. Evidence that a
financial asset is credit-impaired includes observable data about the following events:
- significant financial difficulty of the issuer or the borrower;
- a breach of contract, such as a default or past due event;
- the lender(s) of the borrower, for economic or contractual reasons relating to the
borrower’s financial difficulty, having granted to the borrower a concession(s) that the
lender(s) would not otherwise consider;
- it is becoming probable that the borrower will enter bankruptcy or other financial
reorganisation; or
- the disappearance of an active market for that financial asset because of financial
difficulties.
4.22 Financial Liabilities

Classification, initial recognition and subsequent measurement
Financial liabilities are classified in the following categories:

- fair value through profit or loss; and
- other financial liabilities.

The Company determines the classification of its financial liabilities at initial recognition. All
financial liabilities are recognized initially at fair value and, in case of other financial liabilities also
include directly attributable transaction costs. The subsequent measurement of financial liabilities
depends on their classification, as follows:
a) Fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held-for-trading
and financial liabilities designated upon initial recognition as being at fair value through profit or
loss. The Company has not designated any financial liability upon recognition as being at fair value
through profit or loss.
b) Other financial liabilities

After initial recognition, other financial liabilities which are interest bearing subsequently measured
at amortized cost, using the effective interest rate method. Gains and losses are recognized in
profit or loss for the year, when the liabilities are derecognized as well as through effective interest
rate amortisation process.
Derecognition of financial liabilities
The Company derecognises financial liabilities when and only when the Company's obligations are
discharged, cancelled or they expire.