| CIM FINANCE. INTEGRATED REPORT 2022 124 EXPLANATORY NOTES 30 SEPTEMBER 2022 2. A CCOUNTING POLICIES (CONT’D) 2.7 Significant accounting policies (Cont’d) (n) Financial instruments - Initial recognition and subsequent measurement (Cont’d) (x) Deposit from customers and other borrowed funds Financial instruments issued by the Group and the Company that are not held for trading or designated at FVTPL, are classified as liabilities as either deposit from customers or other borrowed funds, where the substance of the contractual arrangement results in the Group and the Company having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity shares. After initial measurement, deposit from customers and other borrowed funds are subsequently measured at amortised cost using the EIR. Amortised cost is calculated by taking into account any discount or premium on the issue and costs that are an integral part of the EIR. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. (i) Financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when the rights to receive cash flows from the asset have expired. The Group and the Company also derecognise the assets if it has both transferred the asset, and the transfer qualifies for derecognition. The Group and the Company have transferred the asset if, and only if, either it has transferred its contractual rights to receive cash flows from the asset or it retains the rights to the cash flow. It retains the rights to the cash flows but has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass–through’ arrangement. Pass-through arrangements are transactions when the Group and the Company retain the contractual rights to receive the cash flows of a financial asset (the ‘original asset’), but assumes a contractual obligation to pay those cash flows to one or more entities (the ‘eventual recipients’), when all of the following three conditions are met: • the Group and the Company have no obligation to pay amounts to the eventual recipients unless it has collected equivalent amounts from the original asset, excluding short-term advances by the entity with the right of full recovery of the amount lent plus accrued interest at market rates • the Group and the Company cannot sell or pledge the original asset other than as security to the eventual recipients for the obligation to pay them cash flows • the Group and the Company have to remit any cash flows it collects on behalf of the eventual recipients without material delay. In addition, the Group and the Company are not entitled to reinvest such cash flows, except for investments in cash or cash equivalent during the short settlement period from the collection date to the date of required remittance to the eventual recipients, and interest earned on such investments is passed to the eventual recipients. A transfer only qualifies for derecognition if: • The Group and the Company have transferred substantially all the risks and rewards of the asset. • The Group and the Company have neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. In relation to the above, the Group and the Company consider the control to be transferred if, and only if, the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without needing to impose additional restrictions on the transfer. When the Group and the Company have transferred its rights to receive cash flows froman asset or has entered into a pass– through arrangement, and have neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of theGroup’s and the Company’s continuing involvement in it. In that case, the Group and the Company also recognise an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group and the Company have retained.
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