2.
Significant accounting policies and other explanatory information (cont'd)
2A.
Significant accountingpolicies (cont'd)
Financial liabilities (cont'd)
Subsequent measurement:
Subsequent measurement based on the classification of the financial liabilities in one of the following two
categories under FRS 39 is as follows:
1. Liabilitiesat fair value throughprofit or loss: Liabilitiesare classified in this categorywhen theyare incurred
principally for the purpose of selling or repurchasing in the near term (trading liabilities) or are derivatives
(except for a derivative that is a designated and effective hedging instrument) or have been classified
in this category because the conditions are met to use the “fair value option” and it is used. Financial
guarantee contracts if significant are initially recognised at fair value and are subsequently measured at
the greater of (a) the amount measured in accordancewithFRS 37 and (b) the amount initially recognised
less,whereappropriate, cumulativeamortisation recognised inaccordancewithFRS18.All changes in fair
value relating to liabilities at fair value through profit or loss are charged to profit or loss as incurred.
2. Other financial liabilities: All liabilities, which have not been classified as in the previous category fall into
this residual category. These liabilities are carried at amortised cost using the effective interest method.
Trade and other payables and borrowings are usually classified in this category. Items classified within
current trade and other payables are not usually re-measured, as the obligation is usually known with a
high degree of certainty and settlement is short-term.
Fair value ofmeasurement
Fair value is taken to be the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date (that is, an exit price). It is a
market-based measurement, not an entity-specific measurement. When measuring fair value, management
uses theassumptions thatmarket participantswouldusewhenpricing theasset or liabilityunder currentmarket
conditions, includingassumptionsabout risk. Theentity’s intention toholdanasset or to settleor otherwise fulfil
a liability isnot taken intoaccount as relevantwhenmeasuring fair value. Inmaking the fair valuemeasurement,
management determines the following: (a) the particular asset or liability beingmeasured (these are identified
and disclosed in the relevant notes below); (b) for a non-financial asset, the highest and best use of the asset
andwhether theasset isused incombinationwithother assetsor onastand-alonebasis; (c) themarket inwhich
an orderly transactionwould take place for the asset or liability; and (d) the appropriate valuation techniques to
usewhenmeasuring fair value. The valuation techniques usedmaximise the use of relevant observable inputs
and minimise unobservable inputs. These inputs are consistent with the inputs a market participant may use
when pricing the asset or liability.
The fair value measurements and related disclosures categorise the inputs to valuation techniques used to
measure fair value by using a fair value hierarchy of three levels. These are recurring fair valuemeasurements
unless stated otherwise in the relevant notes to the financial statements. Level 1 inputs are quoted prices
(unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement
date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The
level is measured on the basis of the lowest level input that is significant to the fair value measurement in its
entirety. Transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of
the reporting year. If a financial instrument measured at fair value has a bid price and an ask price, the price
within the bid-ask spread or mid-market pricing that ismost representative of fair value in the circumstances is
used tomeasure fair value regardless of where the input is categorisedwithin the fair valuehierarchy. If there is
nomarket, or themarketsavailablearenot active, the fair value isestablishedbyusinganacceptable valuation
technique.
The carrying values of current financial instruments approximate their fair values due to the short-termmaturity
of these instrumentsand thedisclosuresof fair valuearenotmadewhen thecarryingamount of current financial
instruments is a reasonable approximation of the fair value. The fair values of non-current financial instruments
may not be disclosed separately unless there are significant differences at the end of the reporting year and in
the event the fair values are disclosed in the relevant notes to the financial statements.
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