Professional Documents
Culture Documents
An Analytical Review
SAP ID : 7018
Report submitted for partial requirement of “Issues & Controversies in Financial Reporting” Course
2020
Contents
Executive Summary.......................................................................................................................2
Introduction...................................................................................................................................4
Executive Summary
The report is based upon the findings of the data extract out of the financial statements of a
particular sector Sugar of Pakistan Stock Exchange. I was given a task to specifically choose a
sector listed on PSX and selects the Five Companies lying under this sector, following are the
companies I have chosen for the required Report
The main target portion of the financial statement for my analysis report based on the
accounting policies and procedure been used or carried out through a fiscal year will be the
Financial Notes.
Note: The financial statement selected for that assigned project are of 2019 Fiscal year and the
companies are been selected regardless of the high or low market capitalization.
Introduction
Significance of Accounting Policies
Accounting policies are very important for the proper understanding of the information provided
in the financial statements. An entity should clearly state the accounting policies it has used
while preparing the financial statements. Disclosure of accounting policies is important because
many accounting standards allow alternative treatments for a same transaction or item. Users of
financial statements will not be able to compare the financial information with other entities if
the accounting policies are not cleared outlined.
These financial statements have been prepared under the historical cost convention except as
otherwise stated in respective accounting policies notes.
The significant accounting policies adopted in the preparation of these financial statements
are set-out below. These policies have been consistently applied to all the years presented,
unless otherwise stated.
These financial statements are the separate financial statements of the Company. In addition to
these separate financial statements, the Company also prepares consolidated financial
statements.
a) Cost
Operating fixed assets except freehold land, building and roads and plant & machinery are
stated at cost less accumulated depreciation and impairment losses. Freehold land is stated at
revalued amount, whereas building & roads and plant & machinery are stated at revalued
amount less accumulated depreciation and impairment losses. Revaluation is carried out by
independent expert. The Company carries out triennial revaluations, considering the change in
circumstances and assumptions from prior year. Capital work-in-progress and major spare parts
and standby equipment are stated at cost. Cost in relation to certain plant and machinery items
include borrowing cost related to the financing of major projects during construction phase.
Subsequent cost, if reliably measurable, are included in the asset's carrying amount or
recognized as separate amount as appropriate, only when it is probable that future economic
benefits associated with the cost will flow to the Company. The carrying amount of any
replaced parts as
extent of the remaining surplus attributable to the asset; all other decreases are charged to
statement of profit or loss.
Depreciation on operating assets is calculated using the reducing balance method to allocate
their cost over their estimated useful life .
Depreciation on additions to property, plant and equipment is charged from the date asset is
available for intended use till date of disposal.
The gain or loss on disposal of an asset, calculated as difference between the sale proceed and
carrying amount of the asset, is recognized in statement of profit or loss account for the year
At its inception, a lease is classified as either a finance lease or an operating lease. Finance
leases transfer substantially all the risks and rewards of ownership. All other leases are
classified as operating leases.
Finance leases are capitalized at the lease commencement at the lower of the fair value of the
leased assets and the present value of the minimum lease payments. Each lease payment is
apportioned between the liability and finance charges using the effective interest method.
Rental obligations, net of finance charges, are included in liabilities in the statement of financial
position.
Rentals payable under operating leases are charged to profit or loss account on a straight-line
basis over the term of the relevant lease. Minimum lease payments receivable under operating
leases are recognized on a straight-line basis over the term of the lease. Impairment of non-
financial assets
Assets that have an indefinite useful life, for example land, are not subject to
amortisation or depreciation and are tested annually for impairment. Assets that are
subject to depreciation/ amortisation are reviewed for impairment at each statement
of financial position date or whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is recognised
for the amount by which the asset’s carrying amount exceeds its recoverable amount.
Reversals of the impairment losses are restricted to the extent that assets carrying
amount does not exceed the carrying amount that would have been determined, net
of depreciation or amortisation, if no impairment loss has been recognised. An
impairment loss or reversal of impairment loss is recognised in the statement of profit
or loss account
Investment in subsidiaries
The profits or losses of subsidiaries are carried forward in their financial statements
and are not dealt within these financial statements except to the extent of dividend
declared by the subsidiaries. Gains and losses on disposal of investment are included
in other income. When the disposal on investment in subsidiary results in loss of
control such that it becomes an associate, the retained investment is carried at cost.
Investment in associates
Investments in associates and jointly controlled entities are initially recognised at cost.
At subsequent reporting date, the recoverable amounts are estimated to determine
the extent of impairment losses, if any, and carrying amounts of investments are
adjusted accordingly. Impairment losses are recognised as expense in the statement of
profit or loss. Where impairment losses are subsequently reversed, the carrying
amounts of these investments are increased to the revised recoverable amounts but
limited to the extent of initial cost of investments. A reversal of impairment loss is
recognised in the statement of profit or loss. The profits and losses of associates and
jointly controlled entities are carried forward in their financial statements and are not
dealt within these financial statements except to the extent of dividend declared by
the associates and jointly controlled entities. Gains and losses on disposal of
investments are included in the statement of profit or loss account.
Stores and spares are stated at cost less allowance for obsolete and slow moving
items. Cost is determined using weighted average method. Items in transit are valued
at cost comprising invoice value and other related charges incurred up to the date of
the statement of financial position date.
Stock-in-trade
Sugar and Ethanol are stated at the lower of cost and net realisable value. Cost is
determined using the average manufacturing cost method. The cost of finished goods
and work in process comprises raw materials, direct labour, other direct costs and
related production overheads.
Net realisable value is the estimated selling price in the ordinary course of business,
less cost of completion and costs necessary to be incurred to make the sale.
Trade debts
Trade debts are recognised and carried at the original invoice amounts, being the fair
value, less an allowance for uncollectible amounts, if any. As explained in note 4.19 to
these financial statements, for measurement of loss allowance for trade debts, the
Company applies IFRS 9 simplified approach to measure the expected credit losses,
previously loss allowance was measured under incurred loss model of IAS 39.
Cash and cash equivalents are carried at cost. For the purpose of statement of cash
flows, cash and cash equivalents comprise balances with banks in current, deposit and
saving accounts, bank overdrafts and cash / running finance. Bank overdrafts are
shown in current liabilities on the statement of financial position.
Borrowings are recognised initially at fair value, net of transaction costs incurred.
Borrowings are subsequently carried at amortised cost; any difference between the
proceeds (net of transaction costs) and the redemption value is recognised in the
statement of profit or loss account over the period of the borrowings using the
effective interest method.
The Company operates a provident fund and an unfunded gratuity scheme for its
employees per details below:
The Company operates a recognized contributory provident fund for its permanent
employees. Equal monthly contributions are made, both by the Company and the
employees to the fund at the specified rate of basic salary and charged to statement
of profit or loss account.
Liabilities for trade and other amounts payable including payable to related parties are
carried at cost, which is the fair value of the consideration to be paid in future for
goods and/or services received, whether or not billed to the Company.
Provisions
Provisions are recognised when the Company has a present legal or constructive
obligation as a result of past events, when it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation and a reliable
estimate of the obligation can be made. Provisions are reviewed at each statement of
financial position date and adjusted to reflect the current best estimate. 4.12 Taxation
(i) Current
Provision for current taxation is based on taxable income for the year determined in
accordance with prevailing law for taxation on income at the applicable rates of
taxation after taking into account tax credits and tax rebates, if any. Income tax
expense is recognised in profit or loss except to the extent that it relates to items
recognised directly in equity or in other comprehensive income.
(ii) Deferred
Deferred income tax is recognised using the statement of financial position liability
method on all temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts appearing in the financial statements. Deferred
tax liabilities are recognised for all taxable temporary differences. Deferred tax asset is
recognised for all deductible temporary differences to the extent that it is probable
that deductible temporary differences will reverse in the future and taxable income
will be available against which the deductible temporary differences, unused tax losses
and tax credit can be utilised.
Deferred tax asset and liability is measured at the tax rate that is expected to apply to
the period when the asset is realised or the liability is settled, based on tax rates that
have been enacted. Deferred tax is charged or credited to income except in the case of
items credited or charged to equity in which case it is included in equity.
Foreign currency transactions are translated into the rupees using the exchange rate
prevailing on the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies are translated into functional currency using the exchange rate
prevailing at the statement of financial position date. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the translation at
year-end exchange rates are recognized in the statement of profit or loss account.
Revenue recognition
Development expenditure
Operating Segments
Operating segments are reported in a manner consistent with the internal reporting
provided to the chief operating decision-maker. The chief operating decision-maker,
who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the Board of Directors that makes strategic
decisions. The management has determined that the Company has two reportable
segments i.e. sugar and ethanol.
The Company presents basic and diluted earnings per share (EPS) data for its ordinary
shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary
shareholders of the Company by the weighted average number of ordinary shares
outstanding during the year. Diluted EPS is determined by adjusting the profit or loss
attributable to ordinary shareholders and the weighted average number of ordinary
shares outstanding for the effects of all dilutive potential ordinary shares.
Financial instruments
Financial assets and financial liabilities are recognized in the statement of financial
position when the Company becomes a party to the contractual provisions of the
instrument. All the financial assets are derecognized at the time when the Company
losses control of the contractual rights that comprise the financial assets. All financial
liabilities are derecognized at the time when they are extinguished that is, when the
obligation specified in the contract is discharged, cancelled, or expires. Any gains or
losses on de-recognition of the financial assets and financial liabilities are taken to the
statement of profit or loss account.
a) Financial assets
Classification
Effective October 1, 2018, the Company classifies its financial assets in the following
measurement categories:
i) amortized cost where the effective interest rate method will apply; ii) fair value
through profit or loss; iii) fair value through other comprehensive income.
The classification depends on the entity's business model for managing the financial
assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in statement
of profit or loss or other comprehensive income. For investment in equity instruments
that are not held for trading, this will depend on whether the Company has made an
irrevocable election at the time of initial recognition to account for the equity
investment at fair value through other comprehensive income (FVOCI). The Company
reclassifies debt investments when and only when its business model for managing
those assets changes.
Regular way purchases and sales of financial assets are recognised on trade-date, the
date on which the Company commit to purchase or sell the asset. Further financial
assets are derecognised when the rights to receive cash flows from the financial assets
have expired or have been transferred and the Company has transferred substantially
all the risks and rewards of ownership.
Measurement
At initial recognition, the Company measure a financial asset at its fair value plus, in
the case of a financial asset not at fair value through profit or loss (FVTPL), transaction
costs that are directly attributable to the acquisition of the financial asset. Transaction
costs of financial assets carried at FVTPL are expensed in statement of profit or loss.
Debt instruments
a) Amortised cost
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 finance income using the effective
interest rate method. Any gain or loss arising on derecognition is recognised directly in
statement of profit or loss account 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 account.
Debt securities, where the contractual cashflows are solely principal and interest and
the objective of the Company's business model is achieved both by collecting
contractual cashflows and selling financial assets are measured at FVTOCI. Movements
in the carrying amount are taken through OCI, except for the recognition of
impairment gains or losses, interest revenue and foreign exchange gains and losses
which are recognised in statement of profit or loss account. 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 account and recognised in other income.
Interest income from these financial assets is included in finance 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 account.
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 the statement of profit or loss and presented in finance income/cost 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 statement of profit or loss account following the derecognition of the
investment. Dividends from such investments continue to be recognised in statement
of profit or loss account as other income when the Company’s right to receive
payments is established.
Following are financial instruments that are subject to the ECL model:
- Trade debts
- Trade deposits, prepayments and other receivables - Cash and bank balances
i) General approach for loans and advances, trade deposits, prepayments and other
receivables and cash and bank balances.
Expected credit losses are a probability weighted estimate of credit losses. The
probability is determined by the risk of default which is applied to the cash flow
estimates. In the absence of a change in credit rating, allowances are recognised when
there is reduction in the net present value of expected cash flows. On a significant
increase in credit risk, allowances are recognised without a change in the expected
cash flows, although typically expected cash flows do also change; and expected credit
losses are rebased from 12 month to lifetime expectations.
The Company considers the probability of default upon initial recognition of asset and
whether there has been a significant increase in credit risk on an ongoing basis
throughout each reporting period. To assess whether there is a significant increase in
credit risk, the Company compares the risk of a default occurring on the instrument as
at the reporting date with the risk of default as at the date of initial recognition. It
considers available reasonable and supportable forward-looking information.
Definition of default
The Company considers the following as constituting an event of default for internal
credit risk management purposes as historical experience indicates that receivables
that meet either of the following criteria are generally not recoverable.
Irrespective of the above analysis, in case of trade debts, the Company considers that
default has occurred when a 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.
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:
The Company recognises life time ECL on trade debts, using the simplified approach.
The measurement of ECL reflects:
Trade debts balance are separately assessed for ECL measurement. All other trade
debts 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 using a provision matrix approach 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:
- Past-due status;
Nature, size and industry of debtors; and - external credit ratings where available.
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 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.
b) Financial Liabilities
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.
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.
The Company derecognises financial liabilities when and only when the Company's
obligations are discharged, cancelled or they expire.
Financial assets and liabilities are offset and the net amount presented in the
statements of financial position when there is a legally enforceable right to offset the
recognised amounts and there is an intention to settle on a net basis, or realise the
asset and settle the liability simultaneously.
Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement
date. The fair value measurement is based on the presumption that the transaction to
sell the asset or transfer the liability takes place either:
- In the absence of a principal market, in the most advantageous market for the
asset or liability
The principal or the most advantageous market is accessible by the Company. The fair
value of an asset or a liability is measured using the assumptions that market
participants would use when pricing the asset or liability, assuming that market
participants act in their economic best interest.
The Company uses valuation techniques that are appropriate in the circumstances and
for which sufficient data are available to measure fair value, maximizing the use of
relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial
statements are categorized within the fair value hierarchy, described as follows, based
on the lowest level input that is significant to the fair value measurement as a whole:
- Level 2 — Valuation techniques for which the lowest level input that is
significant to the fair value measurement is directly or indirectly observable; and
- Level 3 — Valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable
For assets and liabilities that are recognized in the financial statements at fair value on
a recurring basis, the Company determines whether transfers have occurred between
levels in the hierarchy by re-assessing categorization (based on the lowest level input
that is significant to the fair value measurement as a whole) at the end of each
reporting period.
The Board determines the policies and procedures for both recurring fair value
measurement and for nonrecurring measurement. External valuers may be involved
for valuation of significant assets and significant liabilities. For the purpose of fair value
disclosures, the Company determines classes of assets and liabilities on the basis of
the nature, characteristics and risks of the asset or liability and the level of the fair
value hierarchy, as explained above.
Other Income
(i) Income on deposit / saving accounts using the effective yield method.
(iii) Income from other non-recurring goods and services is recognised when the
control is transferred and performance obligations are fulfilled
Property, plant and equipment are stated at cost less accumulated depreciation and
impairment losses except freehold land, factory building, non-factory buildings and plant and
machinery which are stated at revalued amounts.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that future economic benefits associated with
the item will flow to the entity and its cost can be reliably measured. Cost incurred to replace
a component of an item of property, plant and equipment is capitalised and the asset so
replaced is retired from use. Normal repairs and maintenance are charged to the statement of
profit or loss account during the period in which they are incurred.
Major spare parts qualify for recognition as property, plant and equipment when an entity
expects to use them during more than one year. Transfers are made to relevant operating
assets category as and when such items are available for use.
Depreciation is charged to statement profit or loss account using reducing balance method at
the rates given in note
An item of property, plant and equipment is derecognized upon disposal or when no future
economic benefits are expected from its use or disposal. Any gain or loss arising on
derecognition of the asset (calculated as the difference between the net disposal proceeds
and the carrying amount of the asset) is included in the statement of profit or loss account in
the year in which the asset is derecognized.
Assets are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of these assets may not be recoverable. Whenever the carrying
amount of these assets exceed their recoverable amount, an impairment loss is recognized in
the statement of profit or loss account.
Any revaluation increase arising on the revaluation of buildings and plant and machinery is
recognised in other comprehensive income and presented as a separate component of equity
except to the extent that it reverses a revaluation decrease for the same asset previously
recognised in statement of profit or loss, in which case the increase is credited to statement
of profit or loss to the extent of the decrease previously charged. Any decrease in carrying
amount arising on the revaluation of land, buildings and plant & machinery is charged to
statement of profit or loss account to the extent that it exceeds the balance, if any, held in the
surplus on revaluation relating to a previous revaluation of that asset. The surplus on
revaluation to the extent of incremental depreciation charged is transferred to
unappropriated profit. The surplus realized on disposal of revalued fixed assets is credited
directly to retained earnings.
Capital work in progress is stated at cost less impairment if any, and consists of expenditure
incurred and advances made in respect of property, plant and equipment in the course of
their construction and installation. Transfers are made to relevant asset's category as and
when assets are available for intended use.
Intangible Assets
Financial assets
The Company classifies its financial assets in the following three categories:
Such financial assets are initially measured at fair value plus transaction costs that are directly
attributable to the acquisition or issue thereof.
Such financial assets are initially measured at fair value plus transaction costs that are directly
attributable to the acquisition or issue thereof.
A financial asset shall be measured at fair value through profit or loss unless it is measured at
amortized cost or at fair value through other comprehensive income, as aforesaid.
Subsequent measurement
These assets are subsequently measured at amortized cost (determined using the effective
interest method) less accumulated impairment losses.
Interest / markup income, foreign exchange gains and losses and impairment losses arising
from such financial assets are recognized in the statement of profit or loss.
These are subsequently measured at fair value less accumulated impairment losses.
A gain or loss on a financial asset measured at fair value through other comprehensive income
in accordance is recognised in other comprehensive income, except for impairment gains or
losses and foreign exchange gains and losses, until the financial asset is derecognised or
reclassified. When the financial asset is derecognised the cumulative gain or loss previously
recognised in other comprehensive income is reclassified from equity to profit or loss as a
reclassification adjustment (except for investments in equity instruments which are
designated as at fair value through other comprehensive income in whose case the
cumulative gain or loss previously recognized in other comprehensive income is not so
reclassified). Interest is calculated using the effective interest method and is recognised in
statement of profit or loss account.
Net gains or losses arising from remeasurement of such financial assets as well as any interest
income accruing thereon are recognized in the statement of profit or loss account.
Impairment
The Company applies the IFRS 9 'Simplified Approach' to measuring expected credit losses
which uses a lifetime expected loss allowance for all trade receivables. The Company
measures expected credit losses on trade receivables in a way that reflects an unbiased and
probability-weighted amount, time value of money and reasonable and supportable
information at the reporting date about the past events, current conditions and forecast of
future economic conditions. The Company recognises in the statement of profit or loss
account, as an impairment loss, the amount of expected credit losses (or reversal) that is
required to adjust the loss allowance at the reporting date.
De-recognition
Financial assets are derecognized when the rights to receive cash flows from the financial
assets have expired or have been transferred and the Company has transferred substantially
all risks and rewards of ownership.
Financial liabilities
Financial liabilities are classified as measured at amortized cost or 'at fair value through profit
or loss' (FVTPL). A financial liability is classified as at FVTPL if it is classified as held for trading,
it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL
are measured at fair value and net gains and losses, including any interest expense, are
recognized in the statement of profit or loss account.
Financial liabilities are derecognized when the contractual obligations are discharged or
cancelled or have expired or when the financial liability's cash flows have been substantially
modified.
Financial assets and liabilities are offset and the net amount is reported in the statement of
financial position, if the Company has a legally enforceable right to setoff the recognized
amounts and the Company intends to settle either on a net basis or realize the asset and
settle the liability simultaneously.
Stores and spares excluding items in transit are valued at lower of average cost and net
realizable value. Items in transit are valued at cost comprising invoice values plus other
charges incurred thereon accumulated to the reporting date.
Net realizable value signifies the estimated selling price in the ordinary course of business,
less the estimated costs necessary to make the sale.
Provisions are made in the financial statements for obsolete and slow moving inventory based
on management's best estimate regarding there future usability.
Stock-in-trade
These are valued at lower of cost and net realizable value. The cost of inventories comprises
all costs of purchase, costs of conversion and other costs incurred in bringing the inventories
to their present location and condition. Cost is determined as follows.
Net realizable value is determined on the basis of estimated selling price in the ordinary
course of business less costs necessary to be incurred for its sale.
Finished goods : at lower of average manufacturing cost and net realizable value
Trade debts and other receivables are carried at their initial transaction price less the lifetime
expected credit loss allowance.
Cash and cash equivalents are carried at cost. For the purpose of cash flow statement cash
and cash equivalents comprise cash in hand, bank balances and short term borrowing.
Share capital
Ordinary shares are classified as equity and recognized at their face value. Incremental costs
directly attributable to the issue of new shares or options are shown in equity as a deduction,
net of tax, from the proceeds.
Trade and other payables are obligations to pay for goods and services that have been
acquired in ordinary course of business from suppliers. Accounts payable are classified as
current if payment is due within one year or less (or in normal operating cycle of business, if
longer), if not, they are classified as non current liabilities. Liabilities for trade and other
amounts payable are carried at amortized cost.
Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings
are subsequently carried at amortized cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognized in the statement of profit or loss
account over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Company has an unconditional right
to defer settlement of the liability for at least twelve months after the reporting date.
Provisions
Provision is recognized when, as a result of past event, the Company has a present legal or
constructive obligation that can be estimated reliably and it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation.
Subsequently, provisions are reviewed at each reporting date and adjusted to reflect the
current best estimate.
A defined contribution plan is a post-employment benefit plan under which an entity pays
fixed contribution and will have no legal or constructive obligation to pay further amounts.
Obligations for the defined contributions plans are recognized as an employee benefit
expense in statement of profit or loss account when they are due.
The Company operates a recognized provident fund for all its eligible permanent employees.
Equal monthly contributions are made by the Company and employees to the fund at the rate
of 12% of basic salary. The Company's contribution are charged to statement of profit or loss
account.
The Company operates an unfunded gratuity scheme covering all permanent employees.
Contribution is made to this scheme on the basis of actuarial recommendations. The actuarial
valuation is carried out using the Projected Unit Credit Method.
Staff retirement benefits are payable to staff on completion of prescribed qualifying period of
service under the scheme.
All remeasurement gains and losses are recognised in other comprehensive income.
Revenue from local sale (sugar & molasses) is recognized when the customer obtains control
of the goods being when the goods are delivered to the customer and there is no unfulfilled
obligation that could affect the customer's acceptance of the goods. Delivery occurs when the
goods have been dispatched from the Company's premises and either the customer has
accepted the goods in accordance with the sales contract, the acceptance provisions have
elapsed, or the Company has objective evidence that all criteria for acceptance have been
satisfied.
A receivable is recognized when the goods are delivered to customers in case of local sales as
this is the point in time that the consideration is unconditional because only the passage of
time is required before the payment is due.
The Company does not expect to have contracts where the period between the transfer of the
promised goods or services to the customer and payment by the customer exceeds one year.
As a consequence, the Company does not adjust the transaction price for the effect of time
value of money.
Interest income
Return on bank deposits is recognized on a time proportion basis on the principal amount
outstanding and at the rate applicable.
Taxation
Tax expense for the year comprises current and deferred tax. Tax is recognized in the
statement of profit or loss account, except to the extent that it relates to items recognized in
other comprehensive income or directly in equity. In that case, the tax is also recognized in
other comprehensive income or directly in equity, respectively.
Current
Current tax is the amount of tax payable on taxable income for the year, using tax rate
enacted by or substantively enacted at the reporting date, and any adjustment to the tax
payable in respect of previous year. Provision for current tax is based on higher of the taxable
income at current rates of taxation in Pakistan after taking into account tax credits, rebates
and exemptions available, if any or minimum tax u/s 113 of Income Tax Ordinance, 2001 after
taking into account tax credits or Alternative Corporate Tax u/s 113C of the Income Tax
Ordinance, 2001. However, for income covered under final tax regime, taxation is based on
applicable tax rates under such regime. The amount of unpaid income tax in respect of the
current or prior periods is recognized as a liability. Any excess paid over what is due in respect
of the current or prior periods is recognized as an asset.
Deferred
Deferred tax is recognized using the balance sheet liability method, providing for temporary
differences, at the reporting date, between the carrying amount and the tax base of assets
and liabilities for financial reporting purposes.
Deferred tax liabilities are generally recognized for all taxable temporary differences and
deferred tax assets are recognized for all deductible temporary differences and carry forward
of unused tax losses and tax credits, to the extent that it is probable that future taxable profit
will be available against which the deductible temporary differences and /or carry forward of
unused tax losses or tax credits can be utilized.
The carrying amount of all deferred tax assets is reviewed at each reporting date and reduced
to the extent that it is no longer probable that sufficient taxable profits will be available to
allow all or part of the deferred tax assets to be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to
the period when the asset is realized or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the reporting date.
Foreign currency transactions are translated into Pak Rupees which is the Company’s
functional and presentation currency using the exchange rates approximating those prevailing
at the date of the transaction. All monetary assets and liabilities in foreign currencies are
translated into Pak Rupees using the exchange rate at the reporting date. Nonmonetary
assets are translated using exchange rates that existed when the values were determined.
Exchange gains and losses resulting from the settlement of such transactions and from the
translations at the year end exchange rates of monetary assets and liabilities denominated in
foreign currencies are taken to the statement of profit or loss account.
Borrowing cost
Borrowing costs are recognised as an expense in the period in which these are incurred except
to the extent of borrowing cost that are directly attributable to the acquisition, construction
or production of a qualifying asset. Such borrowing costs, if any, are capitalized as part of the
cost of that asset.
1. Statement of compliance
These consolidated financial statements have been prepared in accordance with the
accounting and reporting standards as applicable in Pakistan. The accounting and reporting
standards applicable in Pakistan comprise of:
2. Basis of preparation
These consolidated financial statements have been prepared under historical cost convention,
except for:
• staff retirement benefit plan which is carried at present value of defined benefit
obligation net of fair value of plan assets as prescribed in IAS 19 "Employees
Benefits". and
• investments which have been recognised at fair value in accordance with the
requirements of IFRS-9 "Financial Instruments".
policies. Estimates and judgments are continually evaluated and are based on historic
experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances. Revisions to accounting estimates are recognised in the
period in which the estimate is revised and in any future periods affected.
5. Fixed assets
a) Property, plant and equipment
b) Capital work-in-progress
Capital work-in-progress is stated at cost less impairment losses, if any. Items are
transferred to the respective assets when available for intended use. Significant
borrowing costs related to acquisition, construction and commissioning of a
qualifying asset are capitalised.
Major stores and spare parts qualify for recognition as property, plant and
equipment when the Group expects to use these for more than one year. Transfers
are made to relevant operating fixed assets category as and when such items are
issued for use. Major stores and spare parts are valued at cost less accumulated
impairment, if any.
6. Investments
Investments acquired with the intention to be held for over one year are classified as long
term investments. However, these can be sold earlier due to liquidity requirements. Short
term investments are those which are acquired for a short period. Investments are classified
as follows:
Deposits, advances, prepayments and other receivables are stated initially at fair value and
subsequently measured at amortised cost using the effective interest rate method. Exchange
gains or losses arising in respect of deposits, advances and other receivables in foreign
currency are added to their respective carrying amounts and charged to statement of profit or
loss.
These are valued at the lower of moving average cost and net realisable value except for items
in transit which are valued at cost. Provision is made for obsolescence and slow moving items.
9. Trade debts
These are recognised and carried at the original invoice amounts, being the fair value, less an
allowance for uncollectible amounts, if any. The Company applies the IFRS 9 simplified
approach to measure the expected credit losses (ECL) which uses the life time expected loss
allowance for trade debts.
Cash and cash equivalents are carried in the statement of financial position at cost. For the
purposes of the statement of cash flows, cash and cash equivalents comprise of cash in hand,
with banks on current, savings, treasury call and deposit accounts, net of short term
borrowings under mark-up arrangements, if any.
Staff gratuity
The Group operates an approved defined benefit gratuity scheme for all permanent
employees. Minimum qualifying period for entitlement to gratuity is five years
continuous service with the Group. The scheme is funded and contributions to the
fund are made in accordance with the recommendations of the actuary. The latest
actuarial valuation of the gratuity scheme was carried out as at September 30, 2019.
The projected unit credit method, using the following significant assumptions, have
been used for actuarial valuation.
Provident fund
The Group operates a recognised provident fund scheme for all its permanent
employees. Equal monthly contributions are made by the Group and the employees at
the rate of 8.33% of basic salary plus applicable cost of living allowance.
Borrowings are recorded at the proceeds received. Borrowing costs are recognised as an
expense in the period in which these are incurred except to the extent of borrowing costs that
are directly attributable to the acquisition, construction and commissioning of a qualifying
asset. Such borrowing costs, if any, are capitalised as part of the cost of that asset.
Liabilities for trade and other payables are carried at cost which is the fair value of the
consideration to be paid in the future for goods and services received, whether or not billed to
the Group.
Contract liability is an obligation of the Group to transfer goods and services to a customer for
which the Group has received consideration from the customer. If the customer pays
consideration before the Group transfers goods or services to the customer, a contract
liability is recognised when payment is made. Contract liabilities are recognised in revenue
when Group fulfils the performance obligation under the contract.
15.Unclaimed dividend
The Group recognises unclaimed dividend which was declared and remained unclaimed from
the date it was due and payable. The dividend declared and remained unpaid from the date it
was due and payable is recognised as unpaid dividend. 2.19
16. Taxation
a) Current
Holding Company
Subsidiary Company
Income of the subsidiary company from power generation is exempt from tax
under clause 132 of part I of second schedule to the Income Tax Ordinance,
2001. Accordingly provision for taxation, if any, is made only for other income
which is not covered under the above clause.
b) Deferred
Deferred tax is recognised using the statement of financial position liability method, on
all temporary differences arising between the tax bases of assets and liabilities and
their carrying amounts appearing in the consolidated financial statements. Deferred
tax liabilities are recognised for all taxable temporary differences. Deferred tax assets
are recognised for all deductible temporary differences to the extent that it is probable
that the temporary differences will reverse in the future and taxable income will be
available against which the temporary differences can be utilised.
17.Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a
result of past events, if it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable estimate of the amount can be
made. Provisions are reviewed periodically and adjusted to reflect the current best estimate.
18.Contingencies
Contingencies are disclosed when Group has possible obligation that arises from past event
and whose existence will be confirmed only by occurrence or non-occurrence of one or more
uncertain future events not wholly within the control of entity, or a present obligation that
arises from past event but is not recognised because it is not probable that an outflow of
resources embodying economic benefit will be required to settle the obligation or, when
amount of obligation cannot be measured with sufficient reliability.
19.Foreign currencies
Transactions in foreign currencies are translated into Pak Rupees which is the Group's
functional and presentation currency, at the rates of exchange prevailing on the date of
transactions. Monetary assets and liabilities in foreign currencies are translated into Pak
Rupees at the exchange rates ruling on the consolidated statement of financial position date.
Exchange gains and losses are included in consolidated statement of profit or loss.
20.Revenue recognition
Revenue is recognised when control of the asset is transferred to the customer. Revenue is
measured at fair value of the consideration received or receivable and is recognised on the
following basis:
- Revenue from sale of goods is recognised when or as control of goods have been
transferred to a customer and the performance obligations are met. The credit limit in
contract with customers ranges from 2 to 90 days.
- Storage income is recorded when services are rendered.
- Profit on bank accounts is recognised on accrual basis.
- Dividend income is recognised when the right to receive such payment is established.
- Other revenues are accounted when performance obligations are met.
21.Segment reporting
Segment reporting is based on operating (business) segments of the Group. These business
segments are engaged in providing product or services which are subject to risks and rewards
that are different from the risks and rewards of other segments.
22. Offsetting
Financial assets and liabilities are offset when the Group has a legally enforceable right to
offset and intends to settle either on a net basis or to realise the asset or settle the liability
simultaneously.
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares.
Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of
the Group by the weighted average number of ordinary shares outstanding during the year.
Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders
and the weighted average number of ordinary shares outstanding for the effects of all dilutive
potential ordinary shares.
These consolidated financial statements are presented in Pakistan Rupees, which is the
Group's functional and presentation currency.
rebates available, if any. Income tax expense is recognized in profit and loss account
except to the extent that it relates to items recognized directly in equity, in which case it is
recognized in equity.
(b) Deferred tax
Deferred tax is recognized using the balance sheet liability method on all temporary
differences between the carrying amounts of assets and liabilities for the financial
reporting purposes and the amounts used for taxation purposes.
Deferred tax asset is recognized for all the deductible temporary differences only to the
extent that it is probable that future taxable profits will be available against which the
asset may be utilized. Deferred tax asset is reduced to the extent that it is no longer
probable that related tax benefits will be realized. Deferred tax liabilities are recognized
for all the taxable temporary differences.
Deferred tax asset and liabilities are measured at the tax rates that are expected to apply
to the period when the asset is realized or the liability is settled, based on the tax rates
that have been enacted or substantially enacted by the balance sheet date.
Deferred tax is charged or credited in the income statement, except in the case of items
credited or charged to comprehensive income or equity, in which case it is included in
comprehensive income or equity.
(c ) Sales tax / excise duty
- Revenues, expenses and assets are recognized net of the amount of sales tax / FED
except:
- Where the sales tax / FED incurred on purchase of assets or services is not recoverable
from the taxation authority. - Receivables and payables balances that are stated with
the amount of sales tax / FED included.
The net amount of sales tax / FED recoverable from, or payable to, the taxation authority
is included as part of receivables or payables in the balance sheet.
Trade and other payables
Trade and other payables are carried at cost which is the fair value of consideration to be
paid for goods and/or services received, whether or not billed to the Company.
Provisions
Provisions are recognized when the company has a present legal or constructive obligation
as a result of a past event and is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation of which reliable estimate can
be made. The expense related to provision is presented in profit and loss net of any
reimbursements. The provision is recognized at its present value, accounting for time
value of money, except where the impact for discounting is considered to be immaterial.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current
best estimate.
Property, plant and equipment
(a) Operating fixed assets
- Fixed assets including additions are stated at cost less accumulated depreciation,
except that certain assets which are stated at revalued amount less accumulated
depreciation
- Depreciation on fixed assets is provided on the reducing balance method over its
useful life at the rates specified in the fixed assets schedule.
- Depreciation on additions to property, plant and equipment is charged for the
month in which an asset is acquired or capitalized while no depreciation is charged
for the month in which the asset is disposed off.
- Subsequent costs are included in the asset's carrying amounts or recognized as a
separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Company and the cost of the item
can be measured reliably.
- Maintenance and normal repairs are charged to profit and loss account as and
when incurred. Major repairs and improvements
- are capitalized
- Gain or loss on scrapping or disposal of assets, if any, is charged to profit and loss
account.
- The incremental depreciation charged on revalued assets during the year has been
transferred to retained earnings/accumulated profit to record realization of surplus
to the extent of incremental depreciation.
(b) Capital work in progress
Capital work in progress is stated at cost less identified impairment losses, if any. All
expenditure including applicable borrowing costs, if any, connected with specific assets
incurred during installation and construction period are carried under capital work-in-
progress. These are transferred to specific assets as and when these are available for use.
Stores, spares and loose tools
Stores, spares and loose tools are valued at lower of cost, which is calculated according to
moving average cost, and net realizable value. The cost is determined using weighted
average method.
Net realizable value signifies the estimated selling price in the ordinary course of business
less costs necessarily to be incurred in order to make the sale.
Stores in transit are valued at invoice values including other charges, if any, incurred
thereon.
Stock-in-trade
These are valued at lower of cost and net realizable value. The cost is determined as
follows:
Raw materials: Weighted average cost
Goods in transit: Cost comprising invoice value plus other charges incurred thereon.
Work in process: Weighted average manufacturing cost
Finished goods: Average manufacturing cost
Molasses: Contracted price / net realizable value
Net realizable value signifies the estimated selling price in ordinary course of business less
expenses necessary to be incurred in order to make sale.
Trade debts
Trade debts are recognized and carried at original invoice amount less an allowance for
doubtful debts. Provision for doubtful debts is based on the management's assessment of
customer's outstanding balances and credit worthiness. Trade debts are written off when
identified and considered irrecoverable.
Loans, advances, deposits, prepayments and other receivables
Loans, advances, deposits, prepayments and other receivables are carried at cost less
provision made for doubtful receivables based on review of all outstanding amounts at the
year end. Loans, advances, deposits, prepayments and other receivables considered
irrecoverable are written off.
Cash and cash equivalent
Cash and cash equivalents are carried in the balance sheet at nominal amounts. For the
purpose of the cash flow statement, cash and cash equivalents comprises cash in hand and
balance with banks in current and pls accounts.
Revenue recognition
Revenue from sale of goods is measured at fair value of the consideration received or
receivable, net of discounts and applicable taxes. Revenue is
- Sale of goods is recorded when significant risks and rewards of ownership
are transferred to the customer;
- Interest and rental income are recognized on accrual basis;
- Dividend income is recognized when the company's right to receive the
dividend is established; and
- Sale of scrap is recognized on actual realization basis.
Borrowing costs
Borrowing cost incurred on finance obtained for the construction of qualifying assets are
capitalized up to the date the respective assets are available for the
Ijarah
Ijarah payments under an Ijarah are recognized as an expense in the profit and loss
account on a straight-line basis over the Ijarah term.
Impairment
(a) Financial assets
The Company assesses at each balance date whether there is any objective evidence that
a financial asset or a group of financial asset is impaired. A financial asset is deemed to be
impaired if and only if there is an objective evidence of impairment as a result of one or
more events that have occurred after the initial recognition of the asset and that event has
an impact on the estimated future cash flows of the financial asset that can be reliably
estimated. Any impairment loss on financial assets, including the financial assets carried at
amortized cost, is recognized in profit and loss account.
(b) Non-financial assets
The Company continually assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If such indication exists, the carrying amounts of
such assets are reviewed to assess whether they are recorded in excess of their
recoverable amount. Where carrying values exceed the respective recoverable amount,
assets are written down to their recoverable amounts and the resulting impairment loss is
recognized in profit and loss account for the year.
4.17 Financial instruments
All the financial assets and liabilities are recognized at the time when the Company
becomes a party to the contractual provisions of the instrument. The Company
derecognizes a financial asset or a portion of a financial asset when, and only when, the
enterprise loses control of the contractual rights that comprise the financial asset or
portion of the financial asset. While a financial liability or part of a financial liability is
derecognized from the balance sheet, when, and only when it is extinguished, i.e. when
the obligation specified in the contract is discharged cancelled or expires.
(a) Financial assets
Financial assets are investment in associates, long term loans and advances, long term
deposits, trade debts, short term loans and advances, other receivable and cash and bank
balances. These are initially recognized at its cost which represent fair value of
consideration given for it and subsequent to initial recognition financial assets are carried
at cost, if fair value is not materially different at the balance sheet date.
(b) Financial liabilities
Financial liabilities are classified according to the substance of the contractual agreements
entered into. Significant financial liabilities are long term loans, short term finances,
obligations under finance lease, trade and other payables. All financial liabilities are
initially recognized at cost, which represents fair value of the consideration received at
initial recognition. After initial recognition financial liabilities held for trading are carried at
fair value and all other financial liabilities are measure at amortized cost.
4.18 Off setting of financial instruments
A financial asset and a financial liability are offset and the net amount is reported in the
balance sheet if the company has a legally enforceable right to setoff the recognized
amounts and intends either to settle on a net basis or to realize the asset and settle the
liability, simultaneously.
4.19 Foreign currency translation and transactions
Assets and liabilities in foreign currencies are translated into rupees at the rate of
exchange prevailing at the balance sheet date except for the liabilities covered under
forward exchange contracts which are translated at the contracted rates. Transaction in
foreign currencies are converted into rupees at the rate of ruling on the date of
transactions. Profit or loss arising on translation is recognized in the profit and loss
account currently.
4.20 Related party transactions
Transactions with related parties are priced at an arm's length basis. Prices for these
transactions are determined on the basis of comparable uncontrolled price method, which
sets the price by reference to comparable goods sold or services rendered in an
economically comparable market to a buyer unrelated to the seller.
4.21 Dividends
Dividend distribution to the company's shareholders is recognized as a liability in the
financial statements in the period in which the dividends are approved.
Earnings per share
The Company presents basic and diluted earnings per share (EPS). Basic EPS is calculated
by dividing the profit and loss attributable to ordinary shareholders' of the Company by
the weighted average number of ordinary shares outstanding during the year. Diluted EPS
is determined by using profit and loss attributable to ordinary shareholders' and the
weighted average number of ordinary shares outstanding, adjusted for the effect of all
dilutive potential ordinary shares.
Recognition/measurement
Operating fixed assets except furniture, fixture & fittings, office equipment and
vehicles are stated at revalued amounts less accumulated depreciation and
impairment, if any. Furniture, fixture & fittings, office equipment and vehicles are
stated at cost less accumulated depreciation and impairment, if any.
Depreciation
Depreciation is charged to income applying the reducing balance method at the rates
specified in assets. Depreciation on additions is charged from month of acquisition and
up to the month preceding the month of disposal respectively.
Subsequent cost
Revaluation surplus
The revaluation of freehold land, factory buildings and non-factory buildings thereon is
carried out with sufficient regularity to ensure that the carrying amount of the assets
does not differ materially from the fair value.
Any revaluation increase in the carrying amount of freehold land, factory buildings and
non-factory buildings, plant and machinery is recognised, net of tax, in other
comprehensive income and presented as separate component of equity as
“Revaluation surplus on property, plant and equipment".
Derecognition
The carrying amount of an item of property, plant and equipment is derecognised on
disposal; or when no future economic benefits are expected from its use or disposal.
The gain or loss arising from derecognition of an item of property, plant and
equipment is included in statement of profit or loss when the item is derecognised
b) Capital work-in-progress
Capital work-in-progress is stated at cost accumulated up to the reporting date less
impairment if any and represents costs / expenditures incurred on property, plant and
equipment during the course of construction and implementation, including borrowing cost
capitalized, if any. These are transferred to specific assets as and when assets are available for
intended use.
2. Investment in Associates
The Investment in associates is accounted for under equity method. Under this method, the
investment is initially recognized at cost and the carrying amount is increased or decreased to
recognize the Company's share of the profit or loss of the investee after the date of acquisition which
is recognized in the statement of profit or loss. Dividend received, if any, reduces the carrying amount
of investment. Changes in associate's equity including those arising from incremental depreciation on
revaluation of property, plant and equipment are recognized in retained earnings through statement
of changes in equity.
4. Stock-in-Trade
Stock-in-trade except "by products" are valued at the lower of cost and net realizable value. By
products are valued at net realizable value. Cost is determined using weighted average cost basis
except for those in transit which are stated at invoice price plus other directly attributable costs paid
thereon up to the reporting date. Cost of finished goods and work-in-process consist of cost of direct
materials, labour and a proportion of manufacturing overheads based on normal capacity.
5. Trade Debts
Trade debts are carried at original invoice amount that is fair value of the goods sold less impairment
allowance, if any. When a trade debt is uncollectable, it is written off.
The Company operates an approved funded contributory provident fund scheme for all its
employees eligible for benefit. Equal monthly contributions are made by the company and
employees at the rate of 10% of basic salary plus cost of living allowance. The company's
contribution to the fund is charged to statement of profit or loss for the year.
8. Taxation
b) Deferred taxation
Deferred tax is recognized using liability method, on all temporary differences at the reporting
date between the tax base of assets and liabilities and their carrying values for financial reporting
purposes. Deferred tax liabilities are recognized for all taxable temporary differences. Deferred
tax assets are recognized for all deductible temporary differences to the extent that it is probable
that the deductible temporary differences will reverse in the future and sufficient taxable income
will be available against which the deductible temporary differences can be utilized.
c) Sales tax
Revenues, expenses and assets are recognized net off amount of sales tax except:
i) Where sales tax incurred on a purchase of asset or service is not recoverable from
the taxation authority, in which case the sales tax is recognized as part of the cost of
acquisition of the asset or as part of the expense item as applicable; and
ii) Receivables or payables that are stated with the amount of sales tax included.
iii) The net amount of sales tax recoverable from, or payable to, the taxation authority
is included as part of receivables or payables in the statement of financial position.
11. Provisions
Estimates and judgments are required with respect to provisions which are reviewed at each
reporting date and adjusted to reflect current best estimate.
12.1 Recognition
Financial assets and liabilities are recognised when the company become party to the
contractual provision of the instrument.
- at amortised cost.
- at fair value through profit or loss (FVTPL),
- at fair value through other comprehensive income (FVTOCI),
Financial assets that meet the following conditions are classified as financial assets at
amortised cost:
- the financial asset is held within a business model whose objective is to hold financial
assets in order to collect contractual cash flows; and
- the contractual terms of the financial asset give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount outstanding.
Financial assets that meet the following conditions are classified as financial assets at FVTOCI:
- the financial asset is held within a business model whose objective is achieved by
both collecting contractual cash flows and selling the financial assets; and
- the contractual terms of the financial asset give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount outstanding.
By default, all other financial assets are classified as financial assets at FVTPL."
Financial assets and liabilities at fair value through profit or loss (FVTPL)
These are subsequently measured at fair value. Realised and unrealised gains and losses
arising from changes in the fair value of the financial assets and liabilities held at FVTPL and
any interest / mark-up or dividend income are included in the statement profit or loss. Where
management has opted to recognise a financial liability at FVTPL, any changes associated with
the Company’s own credit risk will be recognized in other comprehensive income/(loss).
13. Impairment
a) Financial assets
The Company assesses on a forward looking basis the expected credit losses associated with
its financial assets. The impairment methodology applied depends on whether there has been
a significant increase in credit risk. The Company applies the simplified approach to recognise
lifetime expected credit losses for trade and other receivables, if any. When determining
whether the credit risk of a financial asset has increased significantly since initial recognition
and when estimating ECLs, the Company considers reasonable and supportable information
that is relevant and available without undue cost or effort.
b) Non-Financial assets
The carrying amount of non-financial assets is assessed at each reporting date to determine
whether there is any indication of impairment. If any such indication exists then the
recoverable amount of such assets is estimated. An impairment loss is recognised if the
carrying amount of a specific asset or its cash-generating unit exceeds its recoverable amount.
A cash-generating unit is the smallest identifiable asset group that generates cash flows that
largely are independent from other assets and groups. Impairment losses are recognized in
statement of profit or loss.