25. Financial instruments

Financial assets are allocated to the following categories of financial instruments:

• measured at amortised cost;
• measured at fair value through other comprehensive income;
• measured at fair value through profit or loss.

The classification of financial assets is based on a business model and characteristic features of cash flows.

A given debt financial asset is measured at amortised cost if the following two conditions are met:

• the adopted business model provides for the maintenance of a given asset for the purpose of collecting cash flows resulting from an agreement;
• cash flows resulting from an agreement and related to a given instrument comprise exclusively the repayment of the principal amount and interest on the unpaid part of the principal amount – (the SPPI test).

A given debt financial asset is measured at fair value through other comprehensive income if the following two conditions are met:

• the adopted business model provides for the maintenance of a given asset for the purpose of collecting cash flows resulting from an agreement and the sale of such an asset;
• cash flows resulting from an agreement and related to a given instrument comprise exclusively the repayment of the principal amount and interest on the unpaid part of the principal amount – (the SPPI test).

Debt instruments that do not fulfil the aforementioned conditions are measured at fair value through profit or loss.

Investments in equity instruments are always measured at fair value. The Group may make an irrevocable decision to recognise changes in fair value in other comprehensive income unless the instrument is held for trading. In the case of equity instruments held for trading, changes in fair value are recognised in profit or loss.

All standard transactions of purchase and sale of financial assets are recognised at the transaction date, i.e. the date when the entity commits itself to purchase a given asset. Standard transactions of purchase or sale of financial assets are transactions of purchase or sale in which the date of delivery of assets to the other party is generally determined by the laws or customs of a given market.

The impairment model is based on expected credit losses and covers the following:

• financial assets measured at amortised cost;
• debt financial assets measured at fair value through other comprehensive income;
• commitments to grant a credit if there is currently an obligation to provide it;
• granted financial guarantees that fall within the scope of IFRS 9;
• receivables under lease agreements falling within the scope of IFRS 16;
• contractual assets that are within the scope of IFRS 15.

The Group allocates financial liabilities to one of the following categories:

• measured at amortised cost;
• measured at fair value through profit or loss.