CIM FINANCE. INTEGRATED REPORT 2022 | 113 EXPLANATORY NOTES 30 SEPTEMBER 2022 2. A CCOUNTING POLICIES (CONT’D) 2.7 Significant accounting policies (Cont’d) (d) IFRS 9 - Financial Instruments (Cont’d) Financial liabilities The Group and the Company classify its financial liabilities into one of the two categories discussed below. (i) Fair value through profit or loss This category comprises only out-of-the-money derivatives. They are carried in the statement of financial position at fair value with changes in fair value recognised in the profit or loss. (ii) Other financial liabilities at amortised cost Other financial liabilities at amortised cost include the following items: Bankborrowingsare initially recognisedat fair valuenet of any transactioncostsdirectlyattributable to the issueof the instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the statement of financial position. For the purpose of each financial liability, interest expense includes initial transaction costs and any premiumpayable on redemption, as well as any interest or coupon payable while the liability is outstanding. Trade payables and other short termmonetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method. The Group and the Company derecognise a financial liability when its contractual obligations are discharged or cancelled, or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss. Refer to note 2(n) for Initial recognition and subsequent measurement of financial instruments. Financial Guarantee Contracts Financial guarantee contracts are contracts that require the issuer tomake specified payments to reimburse the holder for a loss it incurs because a specified debtor fails tomake paymentswhen due in accordancewith the terms of the debt instrument. Financial guarantees are initially recognised at fair value on the date that the guarantee was given. Other thanwhere the fair value option is applied subsequent to initial recognition, the Bank’s liabilities under such guarantees aremeasured under IFRS 9 (2018) at the higher of the initial measurement, less amortisation calculated to recognise in profit or loss any fee income earned over the reporting period, and the amount of the loss allowance expected from the guarantee at the reporting date. Any increase in the liability relating to guarantees is recognised in profit or loss. For financial guarantee contracts the cash shortfalls are future payments to reimburse the holder for a credit loss that it incurs less any amounts that the entity would expect to receive from the holder, the receivable or any other party. (e) Recognition of income Revenue ismeasured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The Group and the Company recognise revenuewhen it transfers control over a product or service to a customer. (i) Lending and agency related income TheGroup and the Company earn income fromthe financial service they provide to their customers. Income related to lending and agency activities is recognised at an amount that reflects the consideration towhich the Group and the Company expect to be entitled in exchange for providing the services. The performance obligations, as well as the timing of their satisfaction, are identified, and determined, at the inception of the contract. The Group’s and the Company’s revenue contracts do not typically include multiple performance obligations. (ii) Income related to card activities The Group and the Company provide its customers with credit card processing services (i.e., authorisation and settlement of transactions) where it is entitled to a fee for each transaction. These services represent a single performance obligation comprised of a series of distinct daily services that are substantially the same and have the same pattern of transfer over the contract period. The fees vary based on the number of transactions processed and are structured as either a fixed rate per transaction processed or at a fixed percentage of the underlying cardholder transaction. The variable income is allocated to each distinct day, based on the number and value of transactions processed that day, and the allocated revenue is recognised as the entity performs. Revenue from these fees is recognised at a point in time.
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