TMBThanachart Bank Public Company Limited and its Subsidiaries (Formerly TMB Bank Public Company Limited and its Subsidiaries) Notes to the financial statements For the year ended 31 December 2021 22 For equity instruments measured at FVTPL, these assets are subsequently measured at fair value. Net gains and losses, including any dividend income are recognised in profit or loss. For equity instruments measured at FVOCI, these assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss. Reclassifications Financial assets are not reclassified subsequent to their initial recognition, except in the period after the Bank and its subsidiaries change its business model for managing financial assets. Classification of financial liabilities On initial recognition, financial instrument is classified as financial liability in accordance with the substance of the contractual arrangement. The Bank and its subsidiaries classify its financial liabilities, other than financial guarantees and loan commitments, as measured at amortised cost or FVTPL. The Bank and its subsidiaries have designated certain financial liabilities as at FVTPL in either of the following circumstances: - the liabilities are managed, evaluated and reported internally on a fair value basis; or - the designation eliminates or significantly reduces an accounting mismatch that would otherwise arise. Financial liabilities measured at FVTPL are subsequently measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. For financial liabilities measured at amortised cost, these liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss. 3.4.4 Interest recognition Effective interest rate Interest income and expense are recognised in profit or loss using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the gross carrying amount of the financial asset or to the amortised cost of the financial liability. When calculating the effective interest rate for financial instruments other than credit-impaired financial assets, the Bank and its subsidiaries estimate future cash flows considering all contractual terms of the financial instrument, but not ECL. The calculation of the effective interest rate includes transaction costs and fees that are an integral part of the effective interest rate. Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a financial asset or financial liability. The gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any expected credit loss allowance. Calculation of interest income and expense The effective interest rate of a financial asset or financial liability is calculated on initial recognition of a financial asset or a financial liability. In calculating interest income and expense, the effective intertest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortised cost of the 266 TMBThanachart Bank Public Company Limited
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