Annual report eng.2019

N otes To The Consolidated Financial Statements AL MAZAYA HOLDING K.S.C.P. AND ITS SUBSIDIARIES As At 31 December 2019 (All amounts are in Kuwaiti Dinars) OF ACHIEVEMENTS Assessment of whether contractual cash flows are solely payments of principal and interest (SPPI test) Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Group assesses whether the financial instruments’ cash flows represent Solely Payments of Principal and Interest (the ‘SPPI test’). ‘Principal’ for the purpose of this test is defined as the fair value of the financial asset at initial recognition that may change over the life of the financial asset (for example, if there are repayments of principal or amortization of the premium/discount). The most significant elements of interest within a lending arrangement are typically the consideration for the time value of money and credit risk. The Group reclassifies when and only when its business model for managing those assets changes. The reclassification takes place from the start of the first reporting period following the change. Such changes are expected to be very infrequent and none occurred during the year. Initial recognition Purchases and sales of those financial assets are recognized on settlement date – the date on which an asset is delivered to or by the Group. Financial assets are initially recognized at fair value plus transaction costs for all financial assets not carried at FVPL. Derecognition A financial asset (in whole or in part) is derecognized either when: the contractual rights to receive the cash flows from the financial asset have expired; or the Group has transferred its rights to receive cash flows from the financial asset and either a) Has transferred substantially all the risks and rewards of ownership of the financial asset, or b) Has neither transferred nor retained substantially all the risks and rewards of the financial asset, but has transferred control of the financial asset. Where the Group has retained control, it shall continue to recognize the financial asset to the extent of its continuing involvement in the financial asset. Measurement categories of financial assets The Group classifies its financial assets upon initial recognition into the following categories: • Debt instruments at amortized cost. • Debt instruments at fair value through other comprehensive income (FVOCI), with gains or losses recycled to consolidated statement of profit or loss on derecognition. • Equity instruments at FVOCI, with no recycling of gains or losses to consolidated statement of profit or loss on derecognition. • Financial assets at fair value through profit or loss FVPL. Debt instruments at amortized cost A financial asset is measured at amortized cost if it meets both of the following conditions: - The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and - The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding. Debt instruments measured at amortized cost are subsequently measured at amortized cost using the effective yield method adjusted for impairment losses if any. Gain and losses are recognized in consolidated statement of profit and loss when the asset is derecognized, modified or impaired. Cash and cash equivalents, and trade receivables are classified as debt instruments at amortized cost.