Asset Buyout Partners Annual Report 2019

liabilities at fair value through profit and loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. Financial liabilities are initially recognized at fair value, and in the case of loans and borrowings and payables, net of incurred transaction costs. The Group’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and financial instruments. The subsequent measurement of financial liabilities depends on their classification, as described in separate sections below. Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as of fair value through profit or loss. IFRS 9.4.2.1(a) Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes defined by IFRS 9. Separated embedded derivatives are also classified as held for trading unless they are des- ignated as effective hedging derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Gains or losses on liabilities held for trading are recognized in the statement of profit or loss. Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recog- nition, and only if the criteria in IFRS 9 is met. The Group has not designated any financial liability as of fair value through profit or loss. Financial liabilities recognized at amortized cost This is the category most relevant to the Group. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest (EIR) method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit or loss. This category generally applies to interest bearing loans and borrowings. For more information, refer to Note 12. Material financial liabilities for the Group Trade payables and other short-term payables Trade payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. Loans and borrowings Loans and borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortized cost using the effective interest method. Any difference between the proceeds (net of transaction costs) and the redemp- tion value is recognized in profit and loss over the duration of the borrowings. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement for at least 12 months after the balance sheet date. Derivative financial instruments and hedge accounting The Group uses derivative financial instruments such as interest rate swaps to hedge its interest rate risk. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Hedge accounting is not applied and any gains or losses arising from changes in the fair value of derivatives are recognized in the statement of profit and loss and other comprehensive income. Derecognition Financial liabilities are derecognized when the obligation under the liability is discharged, cancelled or has expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability is 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 are recognized in the statement of profit and loss and other comprehen- sive income. Offsetting financial assets and liabilities Financial assets and liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts, and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. 2.7. Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds. Where any group company purchases the Company’s equity share capital (treasury shares), the consideration paid is deducted from equity. When such ordinary shares are subsequently reissued, any consid- eration received, is included in equity attributable to the Company’s equity holders. Voting rights related to treasury shares are annulled and no dividend is allocated to treasury shares. 2.8. Current and deferred income tax The tax expense for the period consist of current and deferred tax. Tax is recognized in the income statement, except when it relates to items recognized in other comprehensive income or directly in equity. In such cases, the tax amount is also recognized in other comprehensive income or directly in equity. The current income tax charge is calculated based on the tax laws enacted or substantively Asset Buyout Partners | Annual Report 2019 23