Econocom - 2020 annual report

06 consolidated financial statements

notes to the consolidated financial statements

Classification and measurement 13.1. of financial instruments

Financial instruments (assets and liabilities) are recorded in the consolidated statement of financial position at their fair value on initial recognition, plus in the case of an asset that is not subsequently recognised at fair value through profit or loss, transaction costs directly attributable to the acquisition of that asset. They are subsequently measured at either fair value (through profit or loss, or through other comprehensive income) or amortised cost, depending on their nature. The classification of a financial asset in each of these categories depends on the management model applied to it by the Company and the characteristics of its contractual cash flows. In practice, trade receivables are measured according to the amortised cost method, even though they may be subject to an assignment of receivables, for example, in the context of factoring. The Group applies the concept of fair value set out in IFRS 13 “Fair Value Measurement”, whereby fair value is “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price)”. Amortised cost represents the fair value on initial recognition (net of transaction costs), plus interest calculated based on

the effective interest rate and less cash outflows (coupons, principal repayments and, where applicable, redemption premiums). Accrued interest (income and expenses) is not recorded at the nominal interest rate of the financial instrument, but based on the instrument’s effective interest rate. Financial assets at amortised cost are tested for impairment whenever there are indications that they may be impaired. Any loss of value is recognised in the income statement. The initial recognition of financial instruments in the consolidated statement of financial position along with their subsequent measurement as described above apply the following interest rate definitions: the coupon rate (coupon), which is • the nominalinterest rate on theinstrument; the effective interest rate; • the market interest rate, which is the • effective interest rate as recalculatedat the measurement date in line with ordinary market inputs. Financial instruments carried in both assets and liabilities are derecognised whenever the related risks and rewards are sold and the Group ceases to have control over those financial instruments (see note 21).

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2020 annual report