Interfront 2023 Annual Report

International Frontier Technologies SOC Ltd Trading as Interfront Financial Statements for the year ended 31 March 2023 106 INTERFRONT ANNUAL REPORT 2023 Summary of Significant Accounting Policies 1.5 Financial instruments (continued) Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Derecognition is the removal of a previously recognised financial asset or financial liability from an entity’s statement of financial position. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability (or group of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, an entity shall estimate cash flows considering all contractual terms of the financial instrument (for example, prepayment, call and similar options), but shall not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate (see the Standard of GRAP on Revenue from Exchange Transactions), transaction costs, and all other premiums or discounts. There is a presumption that the cash flows and the expected life of a group of similar financial instruments can be estimated reliably. However, in those rare cases when it is not possible to reliably estimate the cash flows or the expected life of a financial instrument (or group of financial instruments), the entity shall use the contractual cash flows over the full contractual term of the financial instrument (or group of financial instruments). Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm’s length transaction. A financial asset is: • cash; • a residual interest of another entity; or • a contractual right to: | receive cash or another financial asset from another entity; or | exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity. A financial liability is any liability that is a contractual obligation to: • deliver cash or another financial asset to another entity; or • exchange financial assets or financial liabilities under conditions that are potentially unfavourable to the entity.