Frontken Berhad Annual Report 2023

Frontken Corporation Berhad 200401012517 (651020-T) • ANNUAL REPORT 2023 147 NOTES TO THE FINANCIAL STATEMENTS (CONT’D) 28. FINANCIAL INSTRUMENTS (CONT’D) (a) Financial Risk Management Policies (Cont’d) Credit Risk (Cont’d) (iii) Assessment of impairment losses (Cont’d) • Other receivables The Group and the Company apply the 3-stage general approach to measuring expected credit losses for its other receivables. Inputs, Assumptions and Techniques used for Estimating Impairment Losses Under this approach, the Group and the Company assess whether there is a significant increase in credit risk for receivables by comparing the risk of a default as at the reporting date with the risk of default as at the date of initial recognition. The Group and the Company consider there has been a significant increase in credit risk when there are changes in contractual terms or delay in payment. Regardless of the assessment, a significant increase in credit risk is presumed if a receivable is more than 30 days past due in making a contractual payment. The Group and the Company use 3 categories to reflect their credit risk and how the loss allowance is determined for each category: Category Definition of Category Loss Allowance Performing: Receivables have a low risk of default 12-months expected and a strong capacity to meet credit losses contractual cash flows Underperforming: Receivables for which there is a Lifetime expected significant increase in credit risk credit losses Not performing: There is evidence indicating the Lifetime expected receivable is credit impaired credit losses or more than 90 days past due The Group and the Company measure the expected credit losses of receivables having significant balances, receivables that are credit impaired and receivables with a high risk of default on individual basis. Other receivables are grouped based on shared credit risk characteristics and assessed on collective basis. Loss allowance is measured on either 12-month expected credit losses or lifetime expected credit losses, by considering the likelihood that the receivable would not be able to repay during the contractual period (probability of default, PD), the percentage of contractual cash flows that will not be collected if default happens (loss given default, LGD) and the outstanding amount that is exposed to default risk (exposure at default).

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