- 14 - Recognition, Measurement and Classification of financial liabilities Financial instruments issued by the Group must be classified as financial liabilities or equity instruments by considering contractual obligations. - Where the Group has an unconditional contractual obligation to deliver cash or another financial asset to another entity and is unable to deny or avoid the settlement of the obligation indefinitely, it is considered a financial liability. - Where the Group has no contractual obligation or has an unconditional right to avoid the settlement of the obligation, it is considered an equity instrument. At initial recognition, the Group measures financial liabilities, which are not measured at FVTPL, at fair value minus transaction costs that are directly attributable to the acquisition or issuance of the financial assets. The Group classifies all financial liabilities as subsequently measured at amortised cost, except for some financial liabilities. Derecognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. When the Group exchanges with the existing lender one debt instrument into another one with the substantially different terms, such exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, the Group accounts for substantial modification of terms of an existing financial liability or part of it as an extinguishment of the original financial liability and the recognition of a new financial liability. It is assumed that the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective date is at least 10 percent different from the discounted present value of the remaining cash flows of the original financial liability. If the modification is not substantial, the difference between; (1) the carrying amount of the liability before the modification; and (2) the present value of cash flows after modification should be recognised in profit or loss as the modification gain or loss within other gains and losses. Derivatives The Group is a party to derivatives, which mainly comprise foreign currency forward contracts, interest rate swap contracts, and commodity derivative contracts. Such financial instruments are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, they are remeasured at fair value. The gain or loss on remeasurement is recognised immediately in profit or loss. The fair value of swap contracts is based on broker quotes at the reporting date. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the reporting date. The fair value of forward exchange contracts is based on their listed market price as the reporting date, if available. If the listed market price is not available, then fair value is estimated by forward contract with the same nature and maturity date at the reporting date. 3.22 Basic earnings (loss) per share Basic earnings (loss) per share are calculated by dividing the profit (loss) attributable to owner of the parent by the weighted average number of ordinary shares outstanding during the year less shares of the parent held by a subsidiary excluding treasury shares. 316 IRPC PUBLIC COMPANY LIMITED 56-1 ONE REPORT 2021
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