Page 165 - InterloopAnnualReport2020

NOTES TO THE UNCONSOLIDATED

FINANCIAL STATEMENTS

For the year ended June 30, 2020

C. Impairment
The Company record an allowance for a forward–looking expected credit loss (ECL) approach 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.

The Securities and Exchange Commission of Pakistan (SECP) vide its S.R.O 985 (I)/2019 dated 02
September 2019 has deferred the requirements of IFRS 9 with respect to application of ‘Expected Credit
Loss Method’ in respect of companies holding financial assets due from the Government of Pakistan
till 30 June 2021. In this regard, the companies shall follow relevant requirements of IAS 39 ‘ Financial
Instruments: Recognition and Measurement’ during the exemption period.

D. Derivative financial instruments
Derivatives are initially recognized at fair value. Any directly attributable transaction costs are recognized
in the statement of profit or loss as incurred. Subsequent to initial recognition, derivatives are measured
at fair value, and changes therein are generally recognized in the statement of profit or loss account.

6.24.2 Financial liabilities
A. Classification and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit
or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an
effective hedge, as appropriate.
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs.

i) Financial liabilities at 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 at fair value through profit or loss. Gains or
losses on liabilities held for trading are recognized in the unconsolidated statement of profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated
at the initial date of recognition, and only if the criteria in IFRS 9 are satisfied. The Company has not
designated any financial liability as at fair value through profit or loss.

ii) Loans and borrowings
This is the category most relevant to the Company. After initial recognition, interest–bearing loans and
borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are
recognized in the statement of profit or loss when the liabilities are derecognized as well as through the
EIR amortization process.

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