Financial instruments

Financial asset or financial liabilities can be recognized only when the entity becomes a party to the contractual provision of the instrument. Financial assets include: - financial assets at fair value through profit or loss; -available for sale financial assets; -loans and receivables; -held to maturity investments. Financial liabilities include: -financial liabilities at fair value through profit or loss; -other financial liabilities measured at amortized cost using the effective interest method.

Financial assets initially measured at the transaction price, including transaction costs, except in the initial measurement of financial assets or financial liabilities that are measured at fair value.

Subsequently financial assets and liabilities should be measured at fair value, with the following exceptions: - loans and receivables held to maturity investments and non-derivative financial liabilities should be measured at amortized cost using the effective interest method.

Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction.

The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the carrying amount of the financial assets and liabilities.

At each balance sheet date the company should assess whether there is any evidence of impairment. If any evidence exists the entity is required to do an impairment calculation.

Leases

When the Company is the lessee:

The Company leases certain plant and machinery finance leases and warehouse under operating leases from the third party.

Leases where the company has substantially all risk and rewards of ownership are classified as finance lease. Finance leases should be recorded as an asset and a liability at the lower of fair value of the asset and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges.

Leases where substantially all risks and rewards were not transferred to the Company are classified as an operating leases. Payments made under operating leases are recognized as an expense in the income statement over the lease term on a straight-line basis.

When the Company is the lessor:

The Company leases investment property under operating lease to the third party. Company do not lease under finance leases.

Leases where Company did not transfer all risk and rewards classified as an operating lease. Assets held for operating leases should be presented in the balance sheet of the Company according to the nature of the asset. Lease income should be recognized over the lease term on a straight- line basis in a profit or loss in the period.

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