Page 195 - Full Book_24.4.2021

NOTES TO THE
FINANCIAL STATEMENTS in retrospect

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for the financial year ended 31 december 2020 (continUed)
the Will to Suceed

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2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.5 Financial instruments (continued)
(ii) Classification and subsequent measurement (continued) achieving a leading repute
Financial assets – Business model assessment

the Group and the company make an assessment of the objective of the business model in which a financial asset |
is held at a portfolio level because this best reflects the way the business is managed and information is provided
to management. the information considered includes:
• the stated policies and objectives for the portfolio and the operation of those policies in practice. These include
whether management’s strategy focuses on earning contractual profit income, maintaining a particular profit Paving the Way for a Sustainable future
rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected
cash outflows or realising cash flows through the sale of the assets;
• how the performance of the portfolio is evaluated and reported to the management;

• the risks that affect the performance of the business model (and the financial assets held within that business
model) and how those risks are managed; and
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• how managers of the business are compensated – e.g. whether compensation is based on the fair value of the
assets managed or the contractual cash flows collected.
transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered
sales for this purpose, consistent with the Group’s and the company’s continuing recognition of the assets.
financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis
are measured at fvtPl. adhering to the best Governance Practices

Financial assets – Assessment whether contractual cash flows are solely payments of principal and
profit (“SppI”)
for the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition.
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‘Profit’ is defined as consideration for the time value of money and for the credit risk associated with the principal
amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk
and administrative costs), as well as a profit margin.
in assessing whether the contractual cash flows are solely payments of principal and profit, the Group and the
company consider the contractual terms of the instrument. this includes assessing whether the financial asset Laying the Foundation for Financial Growth
contains a contractual term that could change the timing or amount of contractual cash flows such that it would
not meet this condition. in making this assessment, the Group and the company consider:

• contingent events that would change the amount or timing of cash flows;
• terms that may adjust the contractual coupon rate, including variable-rate features; |
• prepayment and extension features; and
• terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse features).

a prepayment feature is consistent with the SPPi criterion if the prepayment amount substantially represents additional information & disclosure Summary
unpaid amounts of principal and profit on the principal amount outstanding, which may include reasonable
additional compensation for early termination of the contract. additionally, for a financial asset acquired at a
discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount
that substantially represents the contractual par amount plus accrued (but unpaid) contractual profit (which may
also include reasonable additional compensation for early termination) is treated as consistent with this criterion if |
24 th aGm information
the fair value of the prepayment feature is insignificant at initial recognition.