PEILCC 2023 Annual Report

PRINCE EDWARD ISLAND LIQUOR CONTROL COMMISSION Notes to Financial Statements Year Ended March 31, 2023

4. SIGNIFICANT ACCOUNTING POLICIES (continued) Financial assets and financial liabilities

On initial recognition, a financial asset is classified as measured at: amortized cost, fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVTPL). A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL: the asset is held within a business model whose objective is to hold assets to collect contractual cash flow; and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. All other financial assets are classified as measured at FVTPL. Financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis are measured at FVTPL because they are neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets. Financial assets are not reclassified subsequent to their initial recognition, except in the period after the Commission changes its business model for managing financial assets. There were no changes to any of the Commission business models during the current or prior year. The Commission classifies its financial liabilities, other than financial guarantees and loan commitments, as measured at amortized cost or FVTPL. The Commission derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Commission currently has legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously. The Commission has classified its financial assets and liabilities as follows: Cash - fair value through profit or loss. Accounts receivable, accounts payable and accrued liabilities, debentures payable, lease liabilities, and due to the Province of Prince Edward Island - amortized cost. Transaction costs for fair value through profit or loss instruments are recognized as profit or loss immediately while transaction costs for other financial instruments form part of the original value of the financial instrument. De-recognition of a financial instrument occurs when the contractual rights to the cash flow generated by the asset expire, when the financial asset and substantially all of the risks and rewards are transferred to a third party, or when the obligation in the contract is discharged, cancelled, or expires. (continues)

9

40

PEILCC 2022-2023 Annual Report