Page 218 - Pakistan Oilfield Limited - Annual Report 2022

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PAKISTAN OILFIELDS LIMITED

Notes to and Forming Part of the -
Consolidated Financial Statements

For the year ended June 30, 2022

Irrespective of the above analysis, in case of trade debts, the Group considers that default has
occurred when the debt is more than 365 days past due, unless the Group 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.
4.23 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 Group 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 Group 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. Gain 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 Group derecognises financial liabilities when and only when the Group's obligations are
discharged, cancelled or they expire.
4.24 Offsetting

Financial assets and liabilities are offset and the net amount is reported in the statement of financial
position if the Group has a legally enforceable right to setoff the recognized amounts and the
Group intends to settle on a net basis, or realize the asset and settle the liability simultaneously.