IMC ANNUALREPORT 2020 - Flipbook - Page 44
IMC ANNUAL REPORT 2021
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
designate a financial asset that otherwise meets the requirements to
be measured at amortized cost or at FVOCI as at FVTPL if doing so
eliminates or significantly reduces an accounting mismatch that would
otherwise arise. As of 31 December 2021, there are no financial assets
designated at FVTPL.
Business model assessment:
The Group makes an assessment of the objective of the business model
in which a financial asset is held at a portfolio level, because this best
reflects the way the business is managed and information is provided to
management. The information considered includes stated policies and
objectives of the portfolio, how the performance of the portfolio is
evaluated and reported to management, how management is
compensated, the frequency and volume of sales.
Financial assets that are held for trading or are managed and whose
performance is evaluated on a fair value basis are measured at FVTPL.
Assessment whether contractual cash flows are solely
payments of principal and interest (SPPI):
Consolidated
financial statements
Notes to the consolidated
financial statements
Company
financial statements
Other information
Independent Auditor’s report
For the purposes of this assessment, “principal“ is defined as the fair
value of the financial asset on initial recognition. “Interest“ is defined as
consideration for the time value of money and for the credit risk
associated with the principal amount outstanding during a particular
period of time and for other basic lending risks and costs (e.g. liquidity
risk and administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely payments of
principal and interest, the Group considers the contractual terms of the
instrument. This includes assessing whether the financial asset contains
a contractual term that could change the timing or amount of
contractual cash flows such that it would not meet this condition.
Based on the above, the Group classifies its financial assets
in the following categories:
• Financial assets at FVTPL, including the trading securities in long
positions, bonds and mark to market derivatives,
• Held to Collect loans and receivables, which pass the SPPI test and
therefore measured at amortized cost, including cash and cash
equivalents, Due from clearing organizations, Other receivables, and
• FVOCI - equity investments, including exchange memberships and
quoted CME shares.
Management determines the classification of its investments at initial
recognition.
(c) Reclassification – financial assets
Financial assets are not reclassified subsequent to their initial
recognition unless the Group changes its business model for managing
financial assets, in which case all affected financial assets are
reclassified on the first day of the first reporting period following the
change in the business model.
(d) C
lassification & subsequent measurement – financial
liabilities
Financial liabilities are classified as measured at amortized cost or
FVTPL. A financial liability is classified as at FVTPL if it is classified as
held-for-trading, it is a derivative or it is designated as such on initial
recognition. Financial liabilities at FVTPL are measured at fair value and
net gains and losses, including any interest expense, are recognized in
profit or loss. Other financial liabilities are subsequently measured at
amortized cost using the effective interest method. Interest expense
and foreign exchange gains and losses are recognized in profit or loss.
Any gain or loss on derecognition is also recognized in profit or loss.
(e) Impairment
The Group recognizes loss allowances for expected credit losses
(“ECLs”) on the following financial instruments that are not measured
at FVTPL:
• financial assets measured at amortized cost, including cash and cash
equivalents, Due from clearing organizations and Other receivables.
Based upon historical performance and forward-looking information,
the Group’s financial assets are considered to be low risk and therefore
expected credit losses can be assessed under stage 1 of the general
model being a 12-month ECL. These financial assets are considered by
management as having a “low credit risk” as the counterparties have a
low risk of default and have a strong capacity to meet its contractual
cash flow obligations in the near term.
12-month ECL are the portion of ECL that result from default events on
a financial instrument that are possible within the 12 months after the
reporting date. Financial instruments for which a 12-month ECL is
recognized are referred to as “stage 1 financial instruments”.
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