Page 194 - Interloop Annual Report 2018-2019

NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2019
Amortized cost
Financial assets that are held for collection of contractual cash flows where those cash flows
represent solely payments of principal and interest are measured at amortized 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 recognized directly in profit or loss and presented in other
income / (other expenses) together with foreign exchange gains and losses. Impairment losses are
presented as separate line item in the statement of profit or loss.
Fair value through other comprehensive income (FVTOCI)
Financial assets that are held for collection of contractual cash flows and for selling the financial
assets, where the assets’ cash flows represent solely payments of principal and interest, are
measured at FVTOCI. Movements in the carrying amount are taken through other comprehensive
income, except for the recognition of impairment losses (and reversal of impairment losses),
interest income and foreign exchange gains and losses which are recognized in profit or loss.
When the financial asset is derecognized, the cumulative gain or loss previously recognized in
other comprehensive income is reclassified from equity to profit or loss and recognized in other
income / (other expenses). 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/ (other expenses) and impairment losses are presented as separate line item in the
statement of profit or loss.
Fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading, financial
assets designated upon initial recognition at fair value through profit or loss, or financial assets
mandatorily required to be measured at fair value. Financial assets are classified as held for trading
if they are acquired for the purpose of selling or repurchasing in the near term. Financial assets
with cash flows that are not solely payments of principal and interest are classified and measured
at fair value through profit or loss, irrespective of the business model. Not with standing the criteria
for debt instruments to be classified at amortized cost or at fair value through OCI, as described
above, debt instruments may be designated at fair value through profit or loss on initial recognition
if doing so eliminates, or significantly reduces, an accounting mismatch.
Financial assets at fair value through profit or loss are carried in the statement of financial position
at fair value with net changes in fair value recognized in the statement of profit or loss.
B. Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is primarily derecognized when:
Interloop Limited The rights to receive cash flows from the asset have expired, or
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FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2019
The Company has transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-
through’ arrangement; and either (a) the Company has transferred substantially all the risks and
rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the
risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered
into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and
rewards of ownership.
When it has neither transferred nor retained substantially all of the risks and rewards of the asset,
nor transferred control of the asset, the Company continues to recognize the transferred asset to
the extent of its continuing involvement. In that case, the Company also recognizes an associated
liability. The transferred asset and the associated liability are measured on a basis that reflects the
rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured
at the lower of the original carrying amount of the asset and the maximum amount of consideration
that the Company could be required to repay.
C. Impairment
The adoption of IFRS 9 has fundamentally changed the Company’s accounting for impairment
losses for financial assets by replacing IAS 39’s incurred loss approach with a forward-looking
expected credit loss (ECL) approach. IFRS 9 requires the Company to record an allowance for
ECLs for all loans and other debt financial assets not held at FVPL.
ECLs are based on the difference between the contractual cash flows due in accordance with
the contract and all the cash flows that the Company expects to receive. The shortfall is then
discounted at an approximation to the asset’s original effective interest rate.
For trade and other receivables, the Company has applied the standard’s simplified approach
and has calculated ECLs based on lifetime expected credit losses. The Company has established
a provision matrix that is based on the Company’s historical credit loss experience, adjusted for
forward-looking factors specific to the debtors and the economic environment. However, in certain
cases, the Company may also consider a financial asset to be in default when internal or external
information indicates that the Company is unlikely to receive the outstanding contractual amounts
in full before taking into account any credit enhancements held by the Company.
D. Hedge accounting
2018 - 19
IFRS 9 requires that hedge accounting relationships are aligned with its risk management objectives Annual Report
and strategy and to apply a more qualitative and forward-looking approach to assessing hedge
effectiveness.
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