LENMED AIR 2019.pdf

3.14 Financial Instruments The Group classifies financial instruments on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial instruments are recognised in the statement of financial position at fair value when the Group becomes a party to the contractual provisions of the instrument. Direct transaction costs are included in the initial carrying value of the financial instrument except in the case of financial instruments classified at fair value through profit and loss, in which case the transaction costs are expensed as they are incurred. The Group has divided its financial instruments into the classes based on the manner in which the financial instruments are managed and reported on for internal management purposes. Cash and cash equivalents Cash and cash equivalents are initially measured at fair value and subsequently measured at amortised cost. In the statement of cash flows, bank overdrafts are offset against cash and cash equivalents. Working capital balances These include trade and other receivables and trade and other payables which arise in the normal course of the Group’s business. Subsequent to initial measurement, the constituents of the above classes of financial instruments are measured as follows: Trade and other receivables Trade and loans receivable are subsequently measured at amortised cost using the effective interest rate method and reduced by impairment losses. The Group recognises lifetime ECL for trade and other receivables. The expected credit losses on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate. Subsequent recoveries of amounts previously written off are recognised in profit and loss. Trade and other payables Trade and loans payables are subsequently measured at their amortised cost using the effective interest rate method. 3.15 Intangible assets Intangible assets are initially recognised at cost. Intangible assets are considered for impairment if there is any reason to believe that impairment may be necessary. Factors taken into consideration include the economic viability of the asset itself and where it is a component of a larger cash-generating unit, the viability of the unit. Intangible assets are amortised on a straight-line basis over their estimated useful lives. The amortisationmethods and remaining useful lives are reviewed at least annually. The estimation of the useful lives of intangible assets is based on historic performance as well as expectations about future use and therefore requires a significant degree of judgement. An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. Amortisation is not provided for these intangible assets. The assumptions regarding estimated useful lives for the 2019 financial year were as follows: Computer software 5 years Licences Indefinite 3.16 Interest bearing borrowings Subsequent to initial recognition, interest bearing borrowing is stated at amortised cost with any difference between cost and fair value being recognised in profit or loss over the period of the borrowings using the effective interest rate method. 3.17 Share capital Ordinary shares are classified as equity. Issued share capital is stated in the statement of changes in equity at the amount of the proceeds received less directly attributable issue costs. 3.18 Contingencies and commitments Transactions are classified as contingent liabilities where the Group’s obligations depend on uncertain events and principally consist of contract specific third party obligations under written by banking institutions. Items are classified as commitments where the group commits itself to future transactions, particularly in the acquisition of property, plant and equipment. Contingent liabilities are not recognised. Accounting policies continued CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 102