(13) Financial instruments
A financial instrument is a contract that leads to a financial asset or financial liability for the Group.
(13a) Financial assets
The Group’s main financial assets are:
Loans granted (see accounting policy 14)
Trade and other receivables (see accounting policy 17)
Cash and cash equivalents (see accounting policy 18)
Financial assets are classified as assets that are:
a. carried at amortised cost after initial recognition, or
b. carried at fair value with gains and losses included in the other components of comprehensive income, or
c. carried at fair value with gains and losses accounted for in profit or loss.
This classification is based on the Group’s business model for the management of the financial assets and the features of the contractual cash flows from the financial asset. The financial assets are to be carried at amortised cost (a) if both of the following conditions are satisfied:
i. the financial asset is held as part of a business model aimed at holding financial assets for the purpose of receiving contractual cash flows, and
ii. the contractual terms of the financial asset give rise on certain dates to cash flows exclusively concerning repayments of principal and interest payments on the outstanding amount.
Both conditions are satisfied in the case of the above financial assets. The financial assets are carried at amortised cost. On initial recognition, the amount of financial assets carried at amortised cost is measured using the effective interest method and is subject to impairment. Gains and losses are recognised in profit or loss when the asset matures, is settled, is revised or is subject to impairment.
Provision for expected credit losses
Financial assets are recognised less a provision for expected credit losses. The amount of this provision is measured as the amount of the expected credit losses over the coming 12 months, based on the credit rating of the client. Subsequently, as long as there is no significant deterioration in the credit risk, the credit loss provision continues to be measured at the amount of the 12-month expected credit losses. If, however, a significant increase in the credit risk occurs, on either an individual or a collective basis, the amount of the expected credit loss provision is measured as the expected credit losses over the entire term to maturity of the instrument. In the case of trade receivables and work in progress assets, the simplified approach permitted by IFRS 9, involving consistent recognition of a loss allowance at an amount equal to lifetime expected credit losses, has been used.
(13b) Financial liabilities
The Group has the following financial liabilities:
Cumulative financing preference shares (see accounting policy 22a)
Interest-bearing loans (see accounting policy 22b)
Trade and other payables (see accounting policy 25)
These liabilities are carried at amortised cost after initial recognition, using the effective interest method. When a financial liability (or a part thereof) is eliminated or expires, it ceases to be recognised.
Swapping of debt instruments involving the same lender on substantially different terms is treated as a settlement of the original financial liability and recognition of a new financial liability. The same applies when the terms of an existing financial liability are substantially altered.
The difference between the carrying amount of a financial liability (or part thereof) that is redeemed or is transferred to a third party and the amount paid, including any transfer of assets other than cash and cash equivalents or assumed liabilities, is recognised in profit or loss.
(13c) Netting of financial assets and liabilities
Financial assets and financial liabilities are netted off and presented as a net amount in the statement of financial position if
the Group has a legally enforceable right to net the amounts off, and
the Group intends to settle the liability on a net basis or to realise the asset simultaneously with the settlement of the liability.