MSM Malaysia Holdings Berhad Annual Report 2019

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (f) Financial assets (continued) Impairment (a) Impairment for debt instruments The Group and Company assess on a forward-looking basis the expected credit loss (“ECL”) associated with its debt instruments carried at amortised cost and at FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. The Group and Company’s financial instruments that are subject to the ECL model are as follows: • Receivables (excluding advance payments, prepayments and GST receivables) • Lease receivable • Loans and amounts due from subsidiaries/other related companies/ultimate holding company • Financial assets at fair value through other comprehensive income While cash and cash equivalents are also subject to the impairment requirements of MFRS 9, the identified impairment loss was immaterial. ECL represent a probability-weighted estimate of the difference between present value of cash flows according to contract and present value of cash flows the Group and the Company expect to receive, over the remaining life of the financial instrument. The measurement of ECL reflects: • an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; • the time value of money; and • reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. (i) General 3-stage approach for other receivables, loans and amount due from subsidiaries and related companies that are non-trade related At each reporting date, the Group and Company measure ECL through loss allowance at an amount equal to 12 months ECL if credit risk on a financial instrument or a group of financial instruments has not increased significantly since initial recognition. For all other financial instruments, a loss allowance at an amount equal to lifetime ECL is required. The Company applies MFRS 9 general 3 stage approach to measure ECL which uses a lifetime expected loss allowance for lease receivables carried at amortised cost. The ECL rates is based on the probability of recovery of the receivable within one year or more than a year. Based on management assessment, there is no additional loss allowance identified for lease receivables. The measurement details of ECL are disclosed in the relevant notes to the financial assets. (ii) Simplified approach for trade receivables and amounts due from subsidiaries and related companies that are trade related The Group and Company apply the MFRS 9 simplified approach to measure ECL which uses a lifetime ECL for all trade receivables and amounts due from subsidiaries and related companies that are trade related. The measurement details of ECL are disclosed in the relevant notes to the financial assets. 133 FINANCIAL STATEMENTS 08