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KUWAIT ENERGY PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2015
35
29.
FINANCIAL INSTRUMENTS
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset and
financial liability are disclosed in note 3 to these consolidated financial statements.
Categories of financial instruments
2015
2014
USD 000’s
USD 000’s
Financial assets
Trade and other receivables
47,785
115,334
Cash and cash equivalents
105,297
215,992
Financial liabilities
At amortised cost
- Borrowings*
253,222
252,355
- Obligations under finance lease
5,646
-
- Trade and other payables
119,659
133,653
At fair value through profit and loss account (FVTPL)
-Designated as FVTPL - convertible loans
119,400
117,829
Fair value measurement
Fair value measurement hierarchy for determining and disclosing the fair value of financial instruments is described in note
3. As at 31 December 2015 and 2014 the convertible loans were only the financial instrument carried at fair value and were
classified as level 3. There was no financial instrument classified as level 1 and level 2.
There were no transfers between Level 1, Level 2 and Level 3 fair value measurements during the year.
Details of movements in the fair value of the convertible loan are provided in note 23.
Management believes that fair values of all financial instruments, other than borrowings (note 22), are not materially
different from their carrying values:
(a)
For financial assets and financial liabilities that are liquid or having a short-term maturity (less than three months)
it is assumed that the carrying amounts approximate to their fair value.
(b)
Fair value of borrowings (note 22) and obligation under finance lease (note 24) approximates carrying value which
is recognised at amortised cost.
(c)
Financial assets and liabilities that are measured subsequent to initial recognition at fair value are convertible loans
(note 23).
Financial risk management objectives
The Group’s management monitors and manages the
financial risks relating to the operations of the Group through
internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk
(including commodity price risk, interest rate risk and foreign currency risk), credit risk and liquidity risk. The group
seeks to manage this risk by using derivatives to hedge interest rate risk.
Market risk
Market risk is the risk that changes in market prices, such as commodity prices, interest rates and foreign exchange rates
wil
l affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
The Group is exposed to international commodity-based markets. As a result, it can be affected by changes in crude
oil, natural gas and petroleum product prices and interest rates and foreign exchange rates.
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