GHL System Berhad Annual Report 2018

a n n u a l r e p o r t 2 0 1 8 117 NOT ES TO THE F I NANC I A L STAT EMENTS 3 1 D e c e m b e r 2 0 1 8 C O N T ’ D 21. TRADE AND OTHER RECEIVABLES (cont’d) (f) Expected credit loss (“ECL”) assessment for financial institution customers as at 31 December 2018 are as follows: The Group allocates each exposure to a credit risk grade based on data that is determined to be predictive of the risk of loss and applying experience credit judgement. Credit risk grades are defined using qualitative and quantitative factors that are indicative of the risk of default and are aligned to external credit rating definitions from the agency, Bloomberg. The following table provides information about the exposure to credit risk and ECLs for trade receivables for financial institutions customers as at 31 December 2018. Group Gross carrying amount Impairment loss allowance Credit impairment RM RM 31 December 2018 Grades (Low risk) 22,644,355 (113,222) No Grades (Loss) 1,712,306 (1,712,306) Yes 24,356,661 (1,825,528) Company Gross carrying amount Impairment loss allowance Credit impairment RM RM 31 December 2018 Grades (Low risk) 3,061,541 (15,308) No Grades (Loss) 554,354 (554,354) Yes 3,615,895 (569,662) (g) ECL assessment for non-financial institutions customers as at 31 December 2018 are as follows: The Group uses an allowance matrix to measure the expected credit loss of trade receivables from non- financial institutions customers. Expected loss rates are calculated using the roll rate method separately for exposures in different segments based on the following common credit risk characteristics - geographic region, age of customer relationship and type of product purchased. During this process, the probability of non-payment by the trade receivables is adjusted by forward looking information and multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such impairments are recorded in a separate impairment account with the loss being recognised within administrative expenses in the consolidated statement of profit or loss and other comprehensive income. On confirmation that the trade receivable would not be collectable, the gross carrying value of the asset would be written off against the associated impairment. It requires management to exercise significant judgement in determining the probability of default by trade receivables and appropriate forward looking information.