Page 192 - Interloop Annual Report 2018-2019

NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2019
segment is a component of the Company that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to the transactions with any
of the Company’s other components. An operating segment’s operating results are reviewed regularly
by the chief operating decision maker (‘CODM’) to make decisions about resources to be allocated
to the segment and assess its performance, and for which discrete financial information is available.
The CODM, who is responsible for allocating resources and assessing performance of the operating
segments, has been identified as the Board of Directors of the Company that makes the strategic
decisions.
Segment results that are reported to the CODM include items directly attributable to a segment as well
as those that can be allocated on a reasonable basis. Those incomes, expenses, assets, liabilities and
other balances which cannot be allocated to a particular segment on a reasonable basis are reported
as unallocated.
Transaction among the business segments are recorded at cost. Inter segment sales and purchases
are eliminated from the total.
6.23 Related party transactions
All transactions with related parties are carried out at agreed terms and conditions and on arm’s length
basis.
7. CHANGES IN ACCOUNTING POLICIES DUE TO APPLICABILITY OF CERTAIN INTERNATIONAL
FINANCIAL REPORTING STANDARDS (IFRS)
7.1 IFRS 9, ‘Financial Instruments’
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
7.1.1 Financial assets
The standard introduced new classification and measurement models for financial assets. A financial
asset shall be measured at amortized cost if it is held in order to collect contractual cash flows which
arise on specified dates and that are ‘solely payment of principal and interest (SPPI)’ on the principal
amount outstanding. A debt investment shall be measured at fair value through other comprehensive
income if it is held in order to collect contractual cash flows which arise on specified dates that are solely
principal and interest and as well as selling the asset on the basis of its fair value. All other financial
assets are classified and measured at fair value through profit or loss unless the Company makes an
irrevocable election on initial recognition to present gains and losses on equity instruments in other
comprehensive income. Despite these requirements, a financial asset may be irrevocably designated
as measured at fair value through profit or loss to reduce the effect of, or eliminate, an accounting
Interloop Limited mismatch.
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FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2019
Key changes in accounting policies resulting from application of IFRS 9
A. Classification and measurement of financial instruments
a) Investments and other financial assets
Classification:
The Company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through other comprehensive income, or
through profit or loss), and
- those to be measured at amortized cost
The classification depends on the Company’s business model for managing the financial assets
and the contractual terms of the cash flows. In order for a financial asset to be classified and
measured at amortized cost or fair value through OCI, it needs to give rise to cash flows that
are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This
assessment is referred to as the SPPI test and is performed at an instrument level. The Company’s
business model for managing financial assets refers to how it manages its financial assets in order
to generate cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other
comprehensive income. For investments in debt instruments, this will depend on the business
model in which the investment is held. For investments in equity instruments, 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. The Company
reclassifies debt investments when and only when its business model for managing those assets
changes.
Measurement:
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss, transaction costs that are directly attributable
to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value
through profit or loss are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining
whether their cash flows are solely payment of principal and interest.
i) Debt instruments
Subsequent measurement of debt instruments depends on the Company’s business model for 2018 - 19
managing the asset and the cash flow characteristics of the asset. There are three measurement Annual Report
categories into which the Company classifies its debt instruments:
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