After initial recognition loans and receivables and

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Unformatted text preview: res such as currency fluctuations. A thorough review of the existence, classification and accounting for financial instruments will be required on conversion. Financial assets and financial liabilities are measured initially at fair value. After initial recognition, loans and receivables and held-to-maturity investments are measured at amortised cost. All derivative instruments are measured at fair value with gains and losses recognised in profit or loss except when they qualify as hedging instruments in a cash flow or net investment hedge. A financial asset is derecognised only when the contractual rights to cash flows from that particular asset expire or when substantially all risks and rewards of ownership of the asset are transferred. A financial liability is derecognised when it is extinguished or when the terms are modified substantially. Current requirements Accounting and disclosure requirements may be significantly different from national GAAP Contracts to buy and sell oil and gas and other non-financial items may be included in the scope of the financial instruments standards. There is an exemption for contracts that are held for physical delivery or receipt for the company's expected purchase, sale or usage requirements (the `own use exemption'). However, specific conditions must be met to apply this exemption, and its applicability should be reviewed carefully. Specific types of oil and gas contracts also commonly contain embedded derivatives that may need to be accounted for separately. For example, gas contracts that are not derivatives themselves may contain embedded derivatives as a result of a pricing mechanism linked to an index other than a gas pricing index. As it currently stands, IAS 39 Financial Instruments: Recognition and Measurement requires financial assets to be classified into one of four categories: at fair value through profit or loss; loans and receivables; held to maturity; and available for sale. Financial liabilities are categorised as either financial liabilities at fair value through profit or loss or `other' liabilities. Forthcoming requirements/ Future developments Simplified classifications In Novem...
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