WASCO BERHAD 288 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024 42 FINANCIAL INSTRUMENTS BY CATEGORY (CONTINUED) (b) Financial liabilities (continued) Initial and subsequent measurement Derivative financial liabilities are initially measured at fair value and subsequently stated at fair value, with any resulting gains or losses recognised in profit or loss. Net gains or losses on the derivatives include exchange differences. Trade and other payables are recognised initially at fair value net off directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. Loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised. (c) Offsetting financial instruments Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. The legally enforceable rights must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy. 43 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group’s and the Company’s overall financial risk management objectives and policies are to ensure that the Group and the Company create value and maximise returns for its shareholders. Financial risk management is carried out through risk review, internal control systems, benchmarking to the industry’s best practices and adherence to the Group’s financial risk management policies. The main risks arising from the financial instruments of the Group and the Company are credit risk, market risk, and liquidity risk. Management monitors the Group’s and the Company’s financial position closely with the objective to minimise potential adverse effects on the financial performance of the Group and of the Company. The following sections provide details regarding the Group’s and the Company’s exposure to the above mentioned financial risks and the objectives, policies and processes for managing these risks. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group and the Company. At the reporting date, the Group’s and the Company’s maximum exposure to credit risk is represented by the carrying amounts of each class of financial assets recognised in the statements of financial position, including derivative financial instruments with positive fair values.
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