Page 66 - InterEnergo - Annual Report 2020

Interenergo Accounting report Interenergo
Non-derivative financial assets
Financial assets are not reclassified upon initial recognition unless the Company changes its business model
for financial assets’ management; in such case, the respective financial assets shall be reclassified on the first
day of the next reporting period following the change in the business model.
The Company derecognises a financial asset when the contractual cash flow rights from the financial asset
expire or when it transfers the rights to receive the contractual cash flow from a transaction in which all risks
and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor
retains all risks and benefits of ownership and does not retain control of the financial asset.
Receivables are initially recognized at fair value and subsequently at amortised cost using the effective interest
method, less any impairment losses. Interest expenses and exchange differences are recognized in profit or
loss. Any gain or loss arising on derecognition are also recognized in profit or loss.
Trade receivables and other receivables without a fixed interest rate are measured at the initial amount of the
invoice, less expected credit losses.
Non-derivative financial liabilities
Financial liabilities are initially recognised on the date they are incurred. The Company derecognises a financial
liability when the obligations under the contract are fulfilled, cancelled or when they expire. The Company
derecognises a financial liability even when its terms change and the cash flow of the modified liability differs
materially; in such case, the new financial liability is recognised at fair value based on the changed conditions.
Upon derecognition of a financial liability, the difference between the carrying amount and the consideration
paid (including any non-monetary assets transferred or liabilities assumed) is recognized in profit or loss.
Financial liabilities are initially recognised at fair value less any directly attributable transaction costs. After
initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.
Trade and other payables are not measured at the initial amount of the invoice if the effect of discounting is
insignificant.
Most of the Company’s operating and financial liabilities are disclosed at amortised cost, except for derivatives
traded within the framework of its trading activity, such as commodity forward contracts, contracts for cross-
border transmission capacities and foreign currency forward contracts. The fair value of these contracts is
defined on the basis of the valuation model that is as at the date of the statement of financial position based
on publicly available market data on the values of such instruments and is recognized in the statement of
profit or loss.
Offsetting
Financial assets and liabilities are offset and the amount is disclosed in the statement of financial position if
and only if the Company has a legally enforceable right to offset the recognized amounts and intends to either
settle the net amount or cash the asset and settle its liability at the same time.
Derivatives
Contracts relating to purchase or sale of a non-financial asset that can be settled net of cash or by means of
another financial instrument or exchange of financial instruments, are treated in accordance with IFRS 9 as if
they were financial instruments, except for contracts that the Company concluded and continues to own them
for the purpose of receiving or supplying the non-financial asset in accordance with the expected needs after
the purchase, sale or use. Purchase contracts that fall within the scope of IFRS 9 are treated as derivatives
and are valued at fair value through profit or loss.
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Accounting report
The Company enters into contracts on purchasing or selling electricity with financial or physical settlement
for the purpose of trading (standardized futures contracts and commodity forward contracts). Standardized
futures contracts are binding agreements on the purchase or sale of a standard quantity of electricity on a
standard day in the future at a price agreed in the present, and they are traded with on an organized (stock
market) market and are financially settled. Commodity forward contracts are contracts on the purchase or
sale of electricity with a deadline in the future at a price agreed during the contract’s signing and with which
the Company trades directly with partners and are physically settled, whereby the Company is also required
to provide for cross-border transmission capacities. The Company treats these contracts as derivatives and
does not apply an exemption based on own use (IFRS 9.2.4). The effects of trading with futures and forward
contracts are recognized within operating income and expenses, as the Company does not avail itself of the
possibility of using hedge accounting.
Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at
fair value, while changes therein are generally recognized in the statement of profit or loss.
Assets and liabilities measured at fair value through profit or loss are remeasured at fair value at least annually
during the preparation of financial statements.
Impairment of assets
Impairment of financial assets and contract assets
The Company recognises impairments arising on expected credit losses for:
• financial assets measured at amortised cost;
• contract assets;
• derivatives (commodity forward contracts).
The Company measures impairments in amounts equal to the loss over the life of the financial asset (LECL).
The Company measures impairments equal to the 12-month expected credit losses for cash and bank
deposits and financial assets for which the credit risk has not increased significantly since initial recognition.
The recognized amount of impairment of receivables and contract assets is measured at the amount of
losses over the life of the financial asset (LECL). Losses over the life of the financial asset are expected
credit losses that arise from all possible events of default over the life of the financial instrument. 12-month
expected credit losses are those portions of expected credit losses that result from potential defaults within
12 months of the reporting date (or a shorter period if the expected life of the total life of the instrument is
less than 12 months).
Operating receivables that do not include a significant financial component usually have a short-term duration
(less than 12 months), which means that the measurement of impairments in the amount of losses over the
life of the financial asset (LECL) does not differ from that measured in 12 -monthly expected credit losses.
While determining whether the credit risk of a financial asset has increased significantly since initial
recognition, and while estimating expected credit losses, the Company considers reasonable and useful
information that is relevant and available without undue cost or effort. This includes both quantitative and
qualitative data and analyses, based on the Company’s past experience and sound credit ratings, and includes
forward-looking information.
The Company assumes that the credit risk of a financial asset is materially increased if the maturity of the
payment is longer than 30 days. An asset is credit impaired if there is a breach of contract, for example due
to late payment or maturity.
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