| F. | Financial instruments |
| (1) | Non-derivative Financial assets |
Initial recognition of financial assets
The Group initially recognizes loans and receivables and deposits on the date that they are created. Non-derivative financial instruments are comprised of trade and other receivables, cash and deposits.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at their fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, minus any impairment losses.
Loans and receivables comprise cash and cash deposits and trade and other receivables.
Cash
Cash include cash balances available for immediate use.
Deposits include short-term deposits with banking corporation (with original maturities of three months or less) that are readily convertible into known amounts of cash and are exposed to insignificant risks of change in value.
| (2) | Non derivative Financial Liabilities |
Non-derivative financial liabilities include trade and other payables.
Initial recognition of financial liabilities
The Group initially recognizes financial liabilities on the trade date at which the Group becomes a party to the contractual provisions of the instrument.
Financial liabilities are recognized initially at their fair value, plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured, at amortized cost, using the effective interest method.
Transaction costs directly attributable to an expected issuance of an instrument that will be classified as a financial liability are recognized as an asset in the framework of deferred expenses in the statement of financial position. These transaction costs are deducted from the financial liability upon its initial recognition, or are amortized as financing expenses in the statement of “Profit or Loss and Other Comprehensive Income” when the issuance is no longer expected to occur.
Derecognition of financial liabilities
Financial liabilities are derecognized when the obligation of the Group, as specified in the agreement, expires or when it is discharged or cancelled.
| (3) | Determination of fair value |
Preparation of the financial statements requires the Group to determine the fair value of certain assets and liabilities.
When determining the fair value of an asset or liability, the Group uses observable market data as much as possible. There are three levels of fair value measurements in the fair value hierarchy that are based on the data used in the measurement, as follows:
| ● | Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. | |
| ● | Level 2: inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly. | |
| ● | Level 3: inputs that are not based on observable market data (unobservable inputs). |
Further information about fair value is included in Note 19.E on financial instruments.