Heritage Foods Limited

Heritage Foods Limited 232 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 amortized cost or as FVTOCI, is classi fi ed as at FVTPL. Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the consolidated statement of pro fi t and loss. Equity instruments All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading are classi fi ed as at FVTPL. For all other equity instruments, the Group decides to classify the same either as at FVTOCI or FVTPL. The Group makes such election on an instrument-by-instrument basis. The classi fi cation is made on initial recognition and is irrevocable. If the Group decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to the consolidated statement of pro fi t and loss, even on sale of investment. However, the Group may transfer the cumulative gain or loss within equity. De-recognition A fi nancial asset is primarily derecognised when: • The rights to receive cash fl ows from the asset have expired, or • The Group has transferred its rights to receive cash fl ows from the asset or has assumed an obligation to pay the received cash fl ows in full without material delay to a third party under a ‘pass-through’ arrangement and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Group has transferred its rights to receive cash fl ows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of the Group’s continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that re fl ects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. Impairment of fi nancial assets In accordance with Ind AS 109, the Group applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following fi nancial assets and credit risk exposure: • Financial assets that are debt instruments, and are measuredatamortisedcoste.g., loans,debtsecurities, deposits, trade receivables and bank balances • Financial guarantee contracts which are not measured as at FVTPL • Lease receivables under Ind AS 116 The Group follows ‘simpli fi ed approach’ for recognition of impairment loss allowance on trade receivables that do not contain a signi fi cant fi nancing component. Theapplicationof simpli fi edapproachdoes not require the Group to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. For recognition of impairment loss on other fi nancial assets and risk exposure, the Group determines that whether there has been a signi fi cant increase in the credit risk since initial recognition. If credit risk has not increased signi fi cantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased signi fi cantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a signi fi cant increase in credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on 12-month ECL. Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a fi nancial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date. ECL is the di ff erence between all contractual cash fl ows that are due to the Group in accordance with the contract and all the cash fl ows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR. When estimating the cash fl ows, an entity is required to consider • All contractual terms of the fi nancial instrument (including prepayment, extension, call and similar options) over the expected life of the fi nancial