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NOTES TO AND FORMING
PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
207
PAKISTAN OILFIELDS LIMITED
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significant financial difficulty of the issuer or the borrower;
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a breach of contract, such as a default or past due event;
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the lender(s) of the borrower, for economic or contractual reasons relating to the
borrower’s financial difficulty, having granted to the borrower a concession(s) that
the lender(s) would not otherwise consider;
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it is becoming probable that the borrower will enter bankruptcy or other financial
reorganisation; or
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the disappearance of an active market for that financial asset because of financial
difficulties.
(ii)
Simplified approach for trade debts
The Group recognises life time ECL on trade debts, using the simplified approach. The
measurement of ECL reflects:
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an unbiased and probability-weighted amount that is determined by evaluating a
range of possible outcomes;
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reasonable and supportable information that is available at the reporting date
about past events, current conditions and forecasts of future economic conditions.
Trade debts with individually significant balance are separately assessed for ECL
measurement. All other receivables are grouped and assessed collectively based on
shared credit risk characteristics and the days past due. The expected credit losses on
these financial assets are estimated based on the Group’s historical credit loss experience,
adjusted for factors that are specific to the debtors, 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.
Where lifetime ECL is measured on a collective basis to cater for cases where evidence
of significant increases in credit risk at the individual instrument level may not yet be
available, the financial instruments are grouped on the following basis:
- Nature of financial instruments;
- Past-due status;
- Nature, size and industry of debtors; and
- external credit ratings where available.
The grouping is regularly reviewed by management to ensure the constituents of each
group continue to share similar credit risk characteristics.
Recognition of loss allowance
The Group recognizes an impairment gain or loss in the statement of profit or loss for all
financial instruments with a corresponding adjustment to their carrying amount through
a loss allowance account, except for investments in debt instruments that are measured
at FVTOCI, for which the loss allowance is recognised in other comprehensive income
and accumulated in the investment revaluation reserve, and does not reduce the carrying
amount of the financial asset in the statement of financial position.
Regardless of the analysis above, a significant increase in credit risk is presumed if a debtor
is more than 60 days past due in making a contractual payment.