occurs if there is a change in the terms of the contract that significantly

Occurs if there is a change in the terms of the

This preview shows page 105 - 107 out of 236 pages.

occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required under the contract. 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 financial assets are carried at amortized cost using the effective interest method. This method uses an effective interest rate that discounts 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, as well as when these are amortized. Interest earned or incurred is recorded in “Interest and other financial income” or “Interest and other financial charges” accounts, in the consolidated statement of income. Assets in this category are included under current assets except for assets with maturities beyond 12 months from reporting date, which are classified as noncurrent assets. HTM Investments Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as HTM when the MERALCO Group has the positive intention and ability to hold these assets to maturity. After initial measurement, HTM investments are measured at amortized cost using the effective interest method. Gains or losses are recognized in the consolidated statement of income. Assets in this category are included in the current assets except for maturities beyond 12 months from the reporting date, which are classified as noncurrent assets. AFS Financial Assets AFS financial assets are non-derivative financial assets that are designated as AFS or are not classified in any of the three (3) foregoing categories. They are purchased and held indefinitely and may be sold in response to liquidity requirements or changes in market conditions. After initial measurement, AFS financial assets are measured at fair value with unrealized gains or losses recognized in other comprehensive income or OCI until the investment is derecognized, at which time the cumulative gain or loss recorded in OCI is recognized in the consolidated statement of income, or determined to be impaired, at which time the cumulative loss recorded in OCI is recognized in the consolidated statement of income. Interest earned from AFS debt securities is included under “Interest and other financial income” account in the consolidated statement of income. Dividends earned from AFS equity are likewise recognized in the consolidated statement of income under “Interest and other financial income” account when the right of the payment has been established. These are included under noncurrent assets unless there is an intention to dispose of the investment within 12 months from the reporting date.
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Meralco: Lives Changed - Customer at the Core 104 Financial Liabilities Initial Recognition
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