10 Financial instruments are recognized when the Organization becomes a party to the contractual provisions of the instrument until such time as when the rights to receive cash flows from those assets have expired or have been transferred and WHO has transferred substantially all the risks and rewards of ownership. Investments are classified as either financial assets or financial liabilities at fair value through surplus or deficit, held to maturity, available for sale or loans and receivables.
20 Financial assets or financial liabilities at fair value through surplus or deficit are financial instruments that meet either of the following conditions: i) are classified as held for trading (HFT); ii) are designated by the entity upon initial recognition as at fair value through surplus or deficit. Financial instruments that belong to this category are measured at fair value and any gains or losses arising from changes in the fair value are accounted for through surplus or deficit and included within the Statement of Financial Performance in the period in which they arise. All derivative instruments are classified as held for trading but for hedge accounting purpose.
30 Held-to-maturity investments are non derivative financial assets with fixed or determinable payments and fixed maturity that the Organization has the intention and the ability to hold to maturity. Held-to-maturity investments are stated at amortized cost using the effective interest method, with interest income recognized on an effective yield basis in the Statement of Financial Performance. The effective interest method is applied by determining the interest rate that is required to exactly discount all of the future cash flows associated with the bond to arrive at the initial carrying value of the bond (inclusive of any costs necessarily incurred in its acquisition). Therefore where a bond is acquired at a discount to its nominal value that discount increases the effective interest rate and is recognized over the life of the bond.
40 Investments are classified as being available for sale (AFS) where the Organization has not designated them neither as held for trading nor as held to maturity. Available for sale items are stated at fair value (including transaction costs that are directly attributable to the acquisition of the financial asset) with value changes recognized in Equity Available-for-sale Reserve (in the Statement of Changes in Net Assets). Impairment charges and interest calculated using the effective interest method are recognized in the surplus or deficit. When an available-for-sale asset is disposed of, the cumulative gain or loss previously recognized in the Available-for-sale Reserve (in the Statement of Changes in Net Assets) is included in the surplus or deficit for the period.
50 Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are stated at amortized cost calculated using the effective interest rate method, less any impairment. Interest income is recognized on the effective interest basis, other than for short-term receivables where the recognition of interest is immaterial.
