137 | Annual Report | 2023-2024 the shorter of the lease term and useful life of the underlying asset. The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option. o) Financial instruments A Financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Initial recognition and measurement Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted for transaction costs. Subsequent measurement of financial assets and financial liabilities are described below. Non-derivative financial assets: Subsequent measurement Financial assets carried at amortised cost A financial asset is measured at the amortised cost if both the following conditions are met : (a) The asset is held within a business model whose objective is to hold assets for collecting contractual cashflows, and (b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. 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 in interest income in the Statement of Profit and Loss. Non-performing financial assets are carried at amortised cost in the financial statement. Financial assets carried at fair value through other comprehensive income (FVOCI) A financial asset is measured at FVOCI if both the following conditions are met: (a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows and selling financial assets (b) The contractual terms of the financial asset meet the SPPI test. FVOCI instruments are subsequently measured at fair value with gains and losses arising due to changes in fair value recognised in OCI. Interest income are recognised in profit or loss in the same manner as for financial assets measured at amortised cost. Investments Investment in mutual funds and security receipts are measured at fair value through profit and loss (FVTPL). Investment in equity are measured at fair value to other comprehensive income (FVOCI). De-recognition of financial assets Financial assets or a part of financial asset are derecognised when the contractual rights to receive the cash flows from the financial asset have expired, or when the financial asset and substantially all the risks and rewards are transferred. Further, if the Company Arohan Financial Services Limited Notes to financial statements for the year ended March 31, 2024 (Contd.)
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