Page 128 - FBL AR 2019-20

Fermenta Biotech Limited
Annual Report 2019-20

Notes to the Standalone financial statements for the year ended March 31, 2020

(o) Financial instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the
instruments.

Financial assets
Initial recognition and measurement:
All financial assets are recognised initially at fair value. Transaction costs that are directly attributable to the acquisition of financial assets
are added to the fair value of the financial asset on initial recognition. Transaction costs directly attributable to the acquisition of financial
assets as at fair value through profit or loss are recognised immediately in profit or loss. All regular way purchases or sales of financial
assets are recognised or derecognised on a trade date basis. Regular way purchases or sales of financial assets are financial assets that
require delivery of assets within the time frame established by regulation or convention in the market place.

Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories -

(1) Debt instruments at amortised cost
(2) Debt instruments at fair value through other comprehensive income (FVTOCI)
(3) Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL)
(4) Equity instruments measured at fair value through other comprehensive income (FVTOCI)
(1) Debt instruments at amortised cost
A ‘debt instrument’ is measured at the amortised cost, if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI)
on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR)
method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an
integral part of the EIR. The EIR amortisation is included in other income of the Statement of profit and loss. The losses arising from
impairment are recognised in the Statement of profit or loss.

(2) Debt instrument at FVTOCI
A ‘debt instrument’ is measured as at FVTOCI, if both of the following criteria are met:
- The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and the
contractual terms of the instrument that give rise on specified dates to cash flows that are SPPI on the principal amount outstanding.
- Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair
value movements are recognised in the other comprehensive income (OCI). However, the Company recognise interest income,
impairment losses and reversals and foreign exchange gain or loss in the profit or loss. On derecognition of the asset, cumulative
gain or loss previously recognised in OCI is reclassified from the equity to profit or loss. Interest earned whilst holding FVTOCI debt
instrument is reported as interest income using the EIR method.

(3) Debt instrument at FVTPL
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at
amortised cost or as FVTOCI, is classified as at FVTPL. In addition, the Company may elect to designate a debt instrument, which
otherwise meets amortised cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or
eliminates a measurement or recognition inconsistency (referred to as ‘accounting mismatch’).
(4) Equity Instruments
All equity Instruments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading classified as at
FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income
subsequent changes in the fair value. The Company makes such election on an instrument- by-instrument basis. The classification
is made on initial recognition and is irrevocable.

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