Group Overview Operation and Financial Review Financials Other Information Sustainability and Governance Indofood Agri Resources Ltd. 82 Notes to the financial statements For the financial year ended 31 December 2025 2. Summary of material accounting policies information (cont’d) 2.15 Financial instruments (cont’d) (b) Financial liabilities Initial recognition and measurement Financial liabilities are recognised when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value plus, in the case of financial liabilities not at FVPL, net of directly attributable transaction costs. The Group designates its financial liabilities as loans and borrowings, such as trade and other payables, accrued expense, short-term employee benefits liability, bank loans, lease liabilities and due to related parties. Subsequent measurement After initial recognition, financial liabilities that are not carried at FVPL are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the profit or loss. Derecognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. 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 the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit or loss. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of balance sheets 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. 2.16 Impairment of financial assets The Group recognises an allowance for expected credit losses (“ECL”) for all debt instruments not held at FVPL and financial guarantee contracts. ECL are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale or collateral held or other credit enhancements that are integral to the contractual terms.
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