4 FINANCIAL RISK MANAGEMENT (continued) (a) Financial risk management policies (continued) Credit risk (continued) (a) Impairment of financial assets (continued) (ii) Other receivables, loans and amounts due from immediate holding company, subsidiaries and other related companies that are non-trade related using general 3-stage approach The Group uses three categories for other receivables which reflect their credit risk and how the loss allowance is determined for each of those categories (3 stage approach). These financial assets are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the group, and a failure to make contractual payments for a period of greater than 365 days past due. A summary of the assumptions underpinning the Group’s ECL model is as follows: Category Group’s definition of category Basis for recognising ECL Performing Debtors have a low risk of default and a strong capacity to meet contractual cash flows 12 month ECL Underperforming Debtors for which there is a significant increase in credit risk or significant increase in credit risk is presumed if interest and/or principal repayments are 30 days past due Lifetime ECL Non-performing Interest and/or principal repayments are 180 days past due or there is evidence indicating the asset is credit-impaired Lifetime ECL (credit-impaired) Write-off There is evidence indicating that there is no reasonable expectation of recovery based on unavailability of debtor’s sources of income or assets to generate sufficient future cash flows to repay the amount Asset is written off Fixed deposits and bank balances The Group seeks to invest in its cash assets safely by depositing them with licensed financial institutions. The Group’s bank and cash balances were largely placed with major financial institutions in Malaysia. The Directors are of the view that the possibility of non-performance by these financial institutions, including those non-rated financial institutions, is remote on the basis of their financial strength. Inter-company balances The Company provided unsecured loans to subsidiaries. The Company monitors the results of the subsidiaries regularly. As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position and there was no indication that the loans to the subsidiaries are not recoverable. NOTESTOTHE FINANCIAL STATEMENTS FORTHE FINANCIALYEAR ENDED 31 DECEMBER 2021 WHO WE ARE STATEMENT & DISCUSSION BY OUR LEADERS HOWWE OPERATE MSM Malaysia Holdings Berhad ANNUAL INTEGRATED REPORT 2021 312
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