3.8.1 Initial recognition and measurement
Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition.
Financial liabilities are recognized initially at fair value less, in the case of loans and borrowings, directly attributable transaction costs.
The Group’s financial liabilities include trade and other payables, bank overdraft, customer accounts and amounts due to banks.
The measurement of financial liabilities depends on their classification as follows:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that do not meet the hedge accounting criteria as defined by IAS 39.
Gains or losses on liabilities held for trading are recognized in profit or loss.
The Group has not designated any financial liabilities at fair value through profit or loss.
Loans, borrowing, customer accounts and amounts due to banks and payables
After initial recognition, interest bearing loans, borrowings and payables are subsequently measured at amortized cost using the effective interest rate method.
Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the amortization process.
3.8.2 Derecognition of financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. Where 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 a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in profit or loss.
3.8.3 Offsetting financial assets and liabilities
Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if:
| • | There is a currently enforceable legal right to offset the recognized amounts; and |
| • | There is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously. |
The right of set-off:
| • | Must not be contingent on a future event; and |
| • | Must be legally enforceable in all of the following circumstances: |
(i) the normal course of business;
(ii) the event of default; and
(iii) the event of insolvency or bankruptcy of the entity and all of the counterparties