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KUWAIT ENERGY PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 30 June 2016
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3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial liabilities and equity (continued)
Trade payables
Trade payables are recognised initially at fair value, net of transaction costs incurred. Trade payables are subsequently
stated at amortised cost.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred, unless such costs relate to facilities
in which case they are capitalised as non-current assets. Borrowings are subsequently stated at amortised cost; any
difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated
statement of income over the year of the borrowings using the effective interest method.
Convertible loans
Convertible loans, currently held by the Group are classified as “fair value through profit or loss”. These borrowings
are initially and subsequently measured at fair value and any change in the fair value is recognised in the income
statement. The transaction costs paid on these borrowings are also recognised in the income statement.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial year of time to get ready for their intended use or sale, are added to the cost
of those assets, until such time as the assets are substantially ready for their intended use or sale.
Other borrowing costs are calculated on the accrual basis and are recognised in the consolidated statement of income
in the year in which they are incurred.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or
they expire.
Offsetting
Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of
financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there
is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.
Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into
account the characteristic of the asset or liability if market participants would take those characteristics into account
when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in
these consolidated financial statements is determined on such a basis, except for leasing transactions that are within
the scope of IAS 17, and measurements that have some similarities to fair value but are not fair value, such as net
realisable value in IAS 2 or value in use in IAS 36.
In addition, for financial reporting purposes, fair value measurement are categorised into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurement are observable and the significance of the inputs to the fair
value measurement in its entirety, which are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for asset or liability,
either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.