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occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required underthe contract.Loans and ReceivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.Such financial assets are carried at amortized cost using the effective interest method. This method uses an effective interest rate thatdiscounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.Gains or losses are recognized in the consolidated statement of income when the loans and receivables are derecognized or impaired, aswell as when these are amortized. Interest earned or incurred is recorded in “Interest and other financial income” or “Interest and otherfinancial charges” accounts, in the consolidated statement of income. Assets in this category are included under current assets except forassets with maturities beyond 12 months from reporting date, which are classified as noncurrent assets.HTM InvestmentsNon-derivative financial assets with fixed or determinable payments and fixed maturities are classified asHTMwhen theMERALCO Grouphas the positive intention and ability to hold these assets to maturity. After initial measurement,HTMinvestments are measured atamortized cost using the effective interest method. Gains or losses are recognized in the consolidated statement of income. Assets in thiscategory are included in the current assets except for maturities beyond 12 months from the reporting date, which are classified asnoncurrent assets.AFS Financial AssetsAFSfinancial assets are non-derivative financial assets that are designated asAFSor are not classified in any of the three (3) foregoingcategories. They are purchased and held indefinitely and may be sold in response to liquidity requirements or changes in marketconditions. After initial measurement,AFSfinancial assets are measured at fair value with unrealized gains or losses recognized in othercomprehensive income orOCIuntil the investment is derecognized, at which time the cumulative gain or loss recorded inOCIisrecognized in the consolidated statement of income, or determined to be impaired, at which time the cumulative loss recorded inOCIisrecognized in the consolidated statement of income. Interest earned fromAFSdebt securities is included under “Interest and otherfinancial income” account in the consolidated statement of income. Dividends earned fromAFSequity are likewise recognized in theconsolidated statement of income under “Interest and other financial income” account when the right of the payment has beenestablished. These are included under noncurrent assets unless there is an intention to dispose of the investment within 12 months fromthe reporting date.
Meralco: Lives Changed - Customer at the Core104Financial LiabilitiesInitial Recognition