18.7) Financial assets
18.7.1) Classification and measurement
Upon their initial recognition, the Company classifies its financial assets into the following categories: loans and accounts receivables. The classification depends on the purpose for which the asset was acquired.
| i. | Financial assets at fair value through profit or loss |
A financial asset is classified at fair value through profit or loss, if it is classified as held for trading or is designated as such on initial recognition. A financial asset is classified in this category if it is acquired mainly for the purpose of being sold in the short-term. The assets in this category are valued at fair value and the respective changes are recognized in income. Derivative financial instruments are also classified as held for trading, unless they are designated as hedges. At December 31, 2017 and 2016, the Company does not have operations of this nature.
| ii. | Loans and accounts receivable |
Loans and accounts receivable are initially recognized at fair value plus transaction costs and are subsequently stated at amortized cost using the effective interest method less a provision for impairment. In practice, it is usually recognized at invoice amount, adjusted for estimated impairment of the account receivable. These items are shown under current assets, except for items with maturities over 12 months, which are classified as non-current assets.
The booked values of the financial instruments correspond in their entirety to the classification of the loans and accounts receivable.
18.7.2) Impairment of financial assets
The allowance for impairment of accounts receivable is established when there is objective evidence that the Company may not recover amounts receivable according to the original terms of the receivables. The Company analyzes the financial position of its debtors, delinquencies in its portfolio, and other factors to determine the amount of the estimated impairment. The amount of the provision is the difference between the carrying value of an asset and the present value of estimated future cash flows, discounted at the effective interest rate. The carrying amount of the asset is reduced through the use of a provision for uncollectable accounts and the amount of the loss is recognized in the consolidated profit or loss. When an account receivable is considered uncollectible, it is canceled against the allowance for doubtful accounts. Subsequent recoveries of amounts previously written off are credited to the consolidated comprehensive income statement.
