Cloudberry Annual report 2022 Financial statements 118 Note 9 Financial instruments Accounting principle Financial assets The group classifies its financial assets in the following measurement categories: · those to be measured at amortised cost, · those to be measured subsequently at fair value (either through OCI or profit or loss) The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows. Financial assets that are held to collect contractual cash flows and where those cash flows represent solely payments of principal and interest (SPPI) are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/ (losses) together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss. For financial assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. Financial assets recognised at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the income statement. Gains or losses arising from changes in the fair value of the financial instruments at fair value through profit or loss, including interest and dividends, are recognised in the income statement as other gain or loss. Derivatives are always measured at fair value through profit or loss. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged (see note 10 Hedge accounting for further details). For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income. For Impairment losses on accounts receivables the group applies the simplified approach as it follows from IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. An allowance is made on the balance sheet for the expected future credit losses and remains on the balance sheet until it is written off as a credit loss or reversed. Regular purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. Financial liabilities The group classifies its financial liabilities at initial recognition in the following categories · Loans and borrowings including bank overdrafts · Payables · Derivatives (designated as hedging instruments in an effective hedge or fair value recognised in profit or loss) All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. In subsequent periods, all financial liabilities, except derivatives are measured at amortised cost. A financial liability is derecognised when the obligation under the liability is 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. Power Purchase Agreements (PPA) The Group has in some cases entered into PPA for the sale of electric power and related products (el-certificates of guarantees of origin) at a fixed price. A characteristic to these agreements is that
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