Page 163 - InterloopAnnualReport2020

NOTES TO THE UNCONSOLIDATED

FINANCIAL STATEMENTS

For the year ended June 30, 2020

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 mismatch.

A. Classification and measurement of financial assets
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.

Debt instruments
Subsequent measurement of debt instruments depends on the Company’s business model for
managing the asset and the cash flow characteristics of the asset. There are three measurement
categories into which the Company classifies its debt instruments:

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.

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