Page 85 - Continental Reinsurance 2022 Annual Report

Statement of Significant Accounting Policies
Cash and cash equivalents for the purpose of cash flow
includes cash-on-hand, deposit held at call with banks
and other short-term highly liquid investments which
originally matures in three months or less.
2.13 Financial instruments
In accordance with IAS 39, all financial assets and
liabilities – which include derivative financial
instruments – have to be recognised in the statement
of financial position and measured in accordance with
their assigned category.
2.13.1 Initial recognition and measurement
Financial instruments are recognised initally when the
company becomes a party to the contractual
provisions of the instruments.
The Group classifies financial instruments, ot their
component parts, on initial recognition as a financial
asset, a financial liability or an equity instrument in
accordance with the substance of the contractual
arrangement.
Classification depends on the purpose for which the
financial instruments were obtained/incurred and
takes place at initial recognition. Classification is re-
assessed on an annual basis.
Financial instruments are measured initially at fair
value, except for equity instruments for which a fair
value is not determinable, which are measured at cost
and are classified as available-for-sale financial assets.
For financial instruments which are not at fair value
through profit or loss, transaction costs are included in
the initial measurement of the instrument.
2.13.2 Derecognition
Financial assets
A financial asset (or, where applicable, a part of a
financial asset or part of a Company of similar financial
assets) is derecognised when:
• The rights to receive cash flows from the asset have
expired;
• The Group 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; and either
(a) the Group has transferred substantially all the risks
and rewards of the asset, or
(b) the Group has neither transferred nor retained
substantially all the risks and rewards of the asset, but
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has transferred control of the asset.
When the Group has transferred its rights to receive
cash flows from an asset or has entered into a pass-
through arrangement, it evaluates if and to what
extent it has retained the risks and rewards of
ownership. When it has neither transferred nor
retained substantially all of the risks and rewards of the
asset, nor transferred control of the asset, the asset is
recognised to the extent of the Group’s continuing
involvement in the asset. In that case, the Group also
recognises an associated liability. The transferred asset
and the associated liability are measured on a basis that
reflects the rights and obligations that the Group has
retained.
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 Group
could be required to repay.
Financial liabilities
A financial liability is derecognised when the
obligation under the liability is discharged or cancelled
or expires. When an existing financial liability is
replaced by another from the same lender on
substantially different terms, or the terms of an
existing liability are substantially modified, such an
exchange or modification is treated as a derecognition
of the original liability and the recognition of a new
liability, and the difference in the respective carrying
amounts is recognised in the profit or loss.
2.13.3 Offsetting financial instruments
Financial assets and liabilities are offset and the net
amount reported in the statement of financial position
when there is a legally enforceable right to offset the
recognised amounts and there is an intention to settle
on a net basis or realise the asset and settle the liability
simultaneously.
2.13.4 Financial Assets
Classication and subsequent measurement
For the purposes of measuring a financial asset after
initial recognition, the Group classifies financial assets
into the following IAS 39 categories: (a) financial
assets at fair value through profit or loss; loans and
receivables; held-tomaturity investments and
available-for-sale financial assets. The classification
depends on the purpose for which the investments
were acquired.