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KUWAIT ENERGY PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 30 June 2016
42
28.
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
30 June
31 December
2016
2015
Audited
Audited
US$ 000’s
US$ 000’s
Financial assets
Trade and other receivables
62,469
47,785
Cash and cash equivalents
54,459
105,297
Financial liabilities
At amortised cost
- Borrowings
253,971
253,222
- Obligation under finance lease
4,789
5,646
- Trade and other payable
120,189
119,659
At fair value through profit and loss account (FVTPL)
-Designated as FVTPL - convertible loans
121,907
119,400
Fair value measurement
Fair value measurement hierarchy for determining and disclosing the fair value of financial instruments is described in
note 3. As at 30 June 2016 and 31 December 2015, the convertible loans were the only financial instrument carried at fair
value and were classified as level 3. There was no financial instrument classified as level 1.
There were no transfers between Level 1, Level 2 and Level 3 fair value measurements during the period.
Details of movements in the fair value of the convertible loan are provided in note 22.
Management believes that fair values of all financial instruments, other than borrowings (note 21), 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 21) and obligation under finance lease (note 23) 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 22).
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.
Market risk
Market risk is the risk that changes in market prices, such as commodity prices, interest rates and foreign exchange
rates will 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, interest rates and foreign exchange rates.