Page 215 - Pakistan Oilfield Limited - Annual Report 2022

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Annual Report 2022

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 Group subsequently measures all equity investments at fair value. Where the Group’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 Group’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.
4.22 Impairment of financial assets

The Group 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 Group applies IFRS 9 simplified
approach to measure the expected credit losses (loss allowance) which uses a life time 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.