Provisions
Provisions are recognized when the Company has a present obligation, legal or constructive, as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Provisions for warranty costs are recognized when the product is sold or service provided. Initial recognition is based on historical experience.
Financial Instruments
The Company determines the classification of its financial assets and liabilities at initial recognition. Initially, all financial assets and liabilities are recognized at fair value. Regular-way trades of financial assets and liabilities are recognized on the trade date. Transaction costs are expensed as incurred except for loans and receivables and loans and borrowings, in which case transaction costs are included in initial cost.
Financial Assets
Subsequent measurement of financial assets depends on the classification. The Company has made the following classifications:
-- Cash and cash equivalents are classified as held for trading and as such are measured at fair value, with changes in fair value being included in profit or loss.-- Accounts receivable are classified as loans and receivables and are recorded at amortized cost using the effective interest rate method, less provisions for doubtful accounts.-- Derivatives are classified as held for trading and are measured at fair value with changes in fair value being included in profit or loss, unless they are designated as effective hedging instruments, in which case changes in fair value are included in other comprehensive income.
The Company assesses at each statement of financial position date whether there is any objective evidence that a financial asset or a group of financial assets is impaired.
Financial Liabilities
Subsequent measurement of financial liabilities depends on the classification. The Company has made the following classifications:
-- Accounts payable and accrued liabilities are classified as financial liabilities held for trading and as such are measured at fair value, with changes in fair value being included in profit or loss.-- Long-term debt is classified as loans and borrowings and as such is subsequently measured at amortized cost using the effective interest rate method. Discounts, premiums and fees on acquisition are taken into account in determining amortized cost.-- Derivatives are classified as held for trading and are measured at fair value with changes in fair value being included in profit or loss, unless they are designated as effective hedging instruments, in which case changes in fair value are included in other comprehensive income.
Fair Value of Financial Instruments
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
-- Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities-- Level 2 - other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly-- Level 3 - techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data
Derivative Financial Instruments and Hedge Accounting
