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KUWAIT ENERGY PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2017
20
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial assets
All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is
under a contract whose terms require delivery of the financial asset within the timeframe established by the market
concerned, and are initially measured at fair value, plus transaction costs that are directly attributable to the acquisition
of financial assets that are recorded at other than fair value through profit and loss.
Financial assets are classified into the following specified categories: financial assets “at fair value through profit and
loss” (FVTPL); “held to maturity investments”; “available for sale (AFS) financial assets” and “loans and receivables”.
Loans and receivables are disclosed in the consolidated balance sheet in the following categories: “cash and cash
equivalents” and “trade and other receivables”. The classification of financial assets depends on the nature and
purpose of the financial assets and is determined at the time of initial recognition.
Cash and cash equivalents
Cash and cash equivalents comprise cash, bank balances and short-term deposits with an original maturity of three
months or less.
Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an
active market are classified as loans and receivables. Loans and receivables are measured at initial recognition at fair
value, and are subsequently measured at amortised cost using the effective interest method, less any impairment.
Interest income is recognised by applying the effective interest rate, except for short-term receivables when the
recognition of interest would be immaterial. Appropriate allowances for estimated irrecoverable amounts are
recognised in the consolidated income statement when there is objective evidence that the asset is impaired.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each consolidated balance sheet date. Financial assets are
impaired where there is objective evidence that, as a result of one or more events that occurred after the initial
recognition of the financial asset, the estimated future cash flows of the asset have been impacted. For trade and other
receivables, objective evidence of impairment could include: (i) significant financial difficulty of the issuer or
counterparty; or (ii) default or delinquency in interest or principal payments; or (iii) it becoming probable that the
borrower will enter bankruptcy or financial re-organisation. For financial assets carried at amortised cost, the amount
of impairment is the difference between the asset’s carrying amount and the present value of estimated future cash
flows, discounted at the asset’s original effective interest rate.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or
it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest
income over the relevant year. The effective interest rate is the rate that exactly discounts estimated future cash
receipts (including all fees or points paid or received that form an integral part of the effective interest rate, transaction
costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a
shorter year to the net carrying amount on initial recognition.