Page 239 - Hitachi IR 2025

(iii) Financial assets at fair value through profit or loss
A financial asset which is not classified in any of the above categories are subsequently fair valued
through profit or loss.
(iv) Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest method,
For trade and other payables maturing within one year from the balance sheet date, the carrying
amounts approximate fair value due to the short maturity of these instruments.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial instrument
and of allocating interest income or expense over the relevant period. The effective interest rate
is the rate that exactly discounts future cash receipts or payments through the expected life of the
financial instrument, or where appropriate, a shorter period.
Classification as debt or equity
Financial liabilities and equity instruments issued by the Company are classified according to the
substance of the contractual arrangements entered into and the definitions of a financial liability
and an equity instrument.
Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company
after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of
direct issue costs.
Financial liabilities
Financial liabilities are initially measured at fair value, net of transaction costs, and are subsequently
measured at amortised cost, using the effective interest rate method where the time value of money
is significant. Interest bearing bank loans, overdrafts are initially measured at fair value and are
subsequently measured at amortised cost using the effective interest rate method. Any difference
between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is
recognised over the term of the borrowings in the statement of profit and loss.
For trade and other payables maturing within one year from the balance sheet date, the carrying
amounts approximate fair value due to the short maturity of these instruments.
Off-setting of financial instruments:
Financial assets and financial liabilities are offset and the net amount is reported in the balance
sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an
intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
(v) Derecognition
A financial asset is primarily derecognised when:
•
The rights to receive cash flows from the asset have expired, or
• The Company has transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party under a
‘pass-through’ arrangement's and either (a) the Company has transferred substantially all the risks
and rewards of the asset, or (b) the Company has neither transferred nor retained substantially
all the risks and rewards of the asset, but has transferred control of the asset.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured
at the lower of the original carrying amount of the asset and the maximum amount of consideration
that the Company could be required to repay.
Integrated Annual Report 2024-25
237