PTT GLOBAL CHEMICAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES FOR THE YEAR ENDED DECEMBER 31, 2021 NOTES TO THE FINANCIAL STATEMENTS - 10 - Recognition, Measurement and Classification of financial liabilities and equities Financial instruments issued by the Group must be classified as financial liabilities or equity instruments by considering contractual obligations. - Where the Group has an unconditional contractual obligation to deliver cash or another financial asset to another entity and is unable to deny or avoid the settlement of the obligation indefinitely, it is considered a financial liability. - Where the Group has no contractual obligation or has an unconditional right to avoid the settlement of the obligation, it is considered an equity instrument. At initial recognition, the Group measures financial liabilities, which are not measured at FVTPL, at fair value minus transaction costs that are directly attributable to the acquisition or issuance of the financial assets. The Group classifies all financial liabilities as subsequently measured at amortised cost, except for some financial liabilities. Derecognition of financial liabilities The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss. When the Group exchanges with the existing lender one debt instrument into another one with the substantially different terms, such exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, the Group accounts for substantial modification of terms of an existing financial liability or part of it as an extinguishment of the original financial liability and the recognition of a new financial liability. It is assumed that the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate is at least 10 percent different from the discounted present value of the remaining cash flows of the original financial liability. If the modification is not substantial, the difference between; (1) the carrying amount of the liability before the modification; and (2) the present value of cash flows after modification; is recognized in profit or loss as the modification gain or loss within other gains and losses. Derivatives Derivatives are used to manage exposure to foreign exchange, commodity price and interest rate arising from operating, financing and investing activities. Derivatives are not used for trading purposes. However, derivatives that do not qualify for hedging instruments are accounted for as trading instruments. Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, they are remeasured at fair value. The gain or loss on remeasurement is recognised immediately in profit or loss. The fair value of simple over-the-counter financial derivative and commodity derivative instruments are based on broker quotes. Those quotes are tested for reasonableness by discounting expected future cash flows using market interest rate for a similar instrument at the measurement date. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group and counterparty when appropriate. Hedge accounting When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows, the effective portion of gain or loss from subsequent measurement of fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion is recognised immediately in profit or loss. 242 PTT GLOBAL CHEMICAL PUBLIC COMPANY LIMITED Form 56-1 One Report 2021
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