2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.6 Financial instruments - initial recognition and subsequent measurement A financial instrument is any contract that gives rise to financial asset of one entity and a financial liability or equity instrument of another entity. (a) Financial assets Initial recognition and measurement F inancial assets are classified, at initial recognition, as subsequently measured at amortised cost or fair value through profit or loss. T he classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s and the Company’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group and the Company applied the practical expedient, the Group and the Company have initially measure a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group and the Company have applied the practical expedient are measured at the transaction price determined under MFRS 15. I n order for a financial asset to be classified and measured at amortised cost, it needs to give rise to cash flows that are ‘solely payments of principal and interest (“SPPI”)’ on the principal amount outstanding. The assessment is referred to as the SPPI test and is performed at an instrument level. T he Group’s and the Company’s business model for managing financial assets refer to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. P urchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group and the Company commit to purchase or sell the asset. Subsequent measurement For purposes of subsequent measurement, financial assets of the Group and of the Company are classified in two categories: - Financial assets at amortised cost (debt instruments) - Financial assets at fair value through profit or loss NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022 172 ANNUAL REPORT 2022
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