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NOTES TO AND FORMING
PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
205
PAKISTAN OILFIELDS LIMITED
c) Fair value through profit or loss (FVTPL)
Assets that do not meet the criteria for amortised cost or FVTOCI are measured at FVTPL. A gain or
loss on a debt investment that is subsequently measured at FVTPL is recognised in profit or loss and
presented net within other income in the period in which it arises.
Equity instruments
The Group subsequently measures all equity investments at fair value. Where the Group’s
management has elected to present fair value gains and losses on equity investments in OCI,
there is no subsequent reclassification of fair value gains and losses to profit or loss following the
derecognition of the investment. Dividends from such investments continue to be recognised in
profit or loss as other income when the Group’s right to receive payments is established.
Changes in the fair value of financial assets at FVTPL are recognised in statement of profit or loss.
4.22 Impairment of financial assets
Effective from July 1, 2018, the Group assesses on a historical as well as on a forward looking basis the
expected credit losses (ECL) as associated with its trade debts, deposits and other receivables and
cash and bank balances carried at amortised cost. The impairment methodology applied depends
on whether there has been a significant increase in credit risk. For trade debts, the Group applies
IFRS 9 simplified approach to measure the expected credit losses (loss allowance) which uses a life
time expected loss allowance while general 3-stage approach for deposits and other receivables and
cash and bank balances i.e to measure ECL through loss allowance at an amount equal to 12-month
ECL if credit risk on a financial instrument or a group of financial instruments has not increased
significantly since initial recognition.
Following are financial instruments that are subject to the ECL model:
- Trade debts
- Deposits and other receivables
- Cash and bank balances
(i)
General approach for short term investment, deposits and other receivables and
cash and bank balances.
The measurement of expected credit losses is a function of the probability of default,
loss given default (i.e. the magnitude of the loss if there is a default) and the exposure
at default. The assessment of the probability of default and loss given default is based
on historical data adjusted by forward-looking information (adjusted for factors that are
specific to the counterparty, general economic conditions and an assessment of both the
current as well as the forecast direction of conditions at the reporting date, including time
value of money where appropriate). As for the exposure at default for financial assets, this
is represented by the assets’ gross carrying amount at the reporting date. Loss allowances
are forward looking, based on 12 month expected credit losses where there has not been
a significant increase in credit risk rating, otherwise allowances are based on lifetime
expected losses.