25. Financial instruments

ACCOUNTING POLICIES

Financial instruments

Classification and measurement

Financial assets are classified into the following categories of financial instruments:

• measured at amortised cost;
• measured at fair value through other comprehensive income;
• measured at fair value through profit or loss, FVTPL.

The classification of financial assets is based on the business model and characteristics of cash flows.

A debt financial asset is measured at amortised cost if both of the following conditions are met:

• the objective of the business model is to hold assets in order to collect contractual cash flows;
• contractual cash flows from the instrument are solely payments of principal and interest on the principal amount outstanding (the SPPI test).

A debt financial asset is measured at fair value through other comprehensive income if both of the following conditions are met:

• the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets;
• contractual cash flows from the instrument are solely payments of principal and interest on the principal amount outstanding (the SPPI test).

Debt instruments that do not meet the above conditions are measured at fair value through profit or loss.

Investments in equity instruments are always measured at fair value. If an equity instruments is not held for trading, the Group can make an irrevocable election at initial recognition to measure it at fair value through other comprehensive income. For equity instruments held for trading, changes in fair value are recognised in profit or loss.

All regular way purchase or sale of a financial asset is recognised on the transaction date, i.e. the date on which the entity agreed to purchase a financial asset. A regular way purchase or sale of a financial asset is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.

The impairment model is based on expected credit losses and covers the following:

• financial assets measured at amortised cost;
• debt financial assets measured at fair value through other comprehensive income;
• loan commitments when there is a present obligation to disburse;
• financial guarantees issued that are within the scope of IFRS 9;
• lease receivables that are within the scope of IFRS 16;
• contract assets that are within the scope of IFRS 15.

The Group classified financial liabilities into one of the following categories:

• measured at amortised cost;
• measured at fair value through profit or loss.