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KUWAIT ENERGY PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 30 June 2016
18
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 as “cash and cash equivalents”, “liquid investments” and “trade and other receivables”.
The classification depends on the nature and purpose of the financial assets and is determined at the time of initial
recognition.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument 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 on 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 financial asset, or, where
appropriate, a shorter year to the net carrying amount on initial recognition.
Cash and cash equivalents
Cash and cash equivalents in the consolidated statement of cash flows include cash, bank balances and short-term
deposits with an original maturity of three months or less.
Trade and other receivables
Trade receivables and other 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 statement
of income 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.
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.
Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance
of the contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of
its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.
Treasury shares
Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. Such
treasury shares may be acquired and held by the Company or by other member of the consolidated group. No gain or
loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.
Any difference between the carrying amount and the consideration, if reissued, is recognised in share premium.
Treasury shares held by the Company are not entitled to any cash dividend that the Company may propose.