CFSL Integrated Report 2025

FINANCIAL

148

Risk Management

Corporate Governance

Statutory Disclosures

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less and bank overdrafts. The Group and the Company derecognise a financial asset when the rights to receive cash flows from the asset have expired or the Group and the Company have transferred substantially all the risks and rewards relating to the assets to a third party. Financial liabilities The Group and the Company classify its financial liabilities into one of the two categories discussed below: (i) Fair value through profit or loss This category comprises only out-of-the-money derivatives. They are carried in the statement of financial position at fair value with changes in fair value recognised in the profit or loss. (ii) Amortised cost Financial liabilities at amortised cost include the following items: Bank borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the statement of financial position. For the purpose of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding. Trade payables and other short term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method. The Group and the Company derecognise a financial liability when its contractual obligations are discharged or cancelled, or 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 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. Refer to note 2(n) for Initial recognition and subsequent measurement of financial instruments. Financial Guarantee Contracts Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of the debt instrument. Financial guarantees are initially recognised at fair value on the date that the guarantee was given. Other than where the fair value option is applied subsequent to initial recognition, the Group’s and the Company’s liabilities under such guarantees are measured under IFRS 9 (2018) at the higher of the initial measurement, less amortisation calculated to recognize in profit or loss any fee income earned over the reporting period, and the amount of the loss allowance expected from the guarantee at the reporting date. Any increase in the liability relating to guarantees is recognised in profit or loss. For financial guarantee contracts, the cash shortfalls are future payments to reimburse the holder for a credit loss that it incurs less any amounts that the entity would expect to receive from the holder, the receivable or any other party. (e) Recognition of income Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The Group and the Company recognise revenue when it transfers control over a product or service to a customer. (i) Lending and agency related income The Group and the Company earn income from the financial service they provide to their customers being insurance agency services, card related activities (note (e)(ii)) and card related factoring activities (note (e)(iii)). Income related to lending and agency activities is recognised at an amount that reflects the consideration to which the Group and the Company expect to be entitled in exchange for providing the services. The performance obligations, as well as the timing of their satisfaction, are identified, and determined, at the inception of the contract. The Group’s and the Company’s revenue contracts do not typically include multiple performance obligations. Insurance agency services The Group and the Company act as an agent and sells insurance policies on behalf of some insurance companies. Revenue is recognised, on a net basis, when the distinct performance obligation has been satisfied by the Group and the Company and the service has been rendered. The distinct performance obligation is satisfied over time based on monthly time increment.