Yinson Annual Report 2018

4. STANDARDS, AMENDMENTS TO PUBLISHED STANDARDS AND INTERPRETATIONS TO EXISTING STANDARDS THAT ARE APPLICABLE TO THE GROUP AND THE COMPANY BUT NOT YET EFFECTIVE (CONTINUED) (a) Financial year beginning on/after 1 February 2018 (continued) (vi) MFRS 9 “Financial Instruments: Classification and Measurement of Financial Assets and Financial Liabilities” will replace MFRS 139 “Financial Instruments: Recognition and Measurement” MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income (“OCI”). The basis of classification depends on the entity’s business model and the cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit or loss with an irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main changes are: - For financial liabilities classified as FVTPL, the fair value changes due to own credit risk should be recognised directly to OCI. There is no subsequent recycling to profit or loss. - When a financial liability measured at amortised cost is modified without this resulting in derecognition, a gain or loss, being the difference between the original contractual cash flows and the modified cash flows discounted at the original effective interest rate, should be recognised immediately in profit or loss. MFRS 9 introduces an expected credit loss model (“ECL”) on impairment that replaces the incurred loss impairment model used in MFRS 139. The expected credit loss model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. The Group and the Company do not expect the new guidance to have a material impact on the classification and measurement of the financial assets and liabilities as: • significant portion of the Group and the Company financial assets are debt instruments currently classified as loans and receivables and measured at amortised cost which meet the conditions for classification at amortised cost under MFRS 9. • there will be no significant impact on the Group’s and the Company’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and majority of the Group’s and all of the Company’s financial liabilities are measured under amortised cost. The derecognition rules have been transferred from MFRS 139 “Financial Instruments: Recognition and Measurement” and have not been changed. • the new hedge accounting rules will align the accounting for hedging instruments more closely with the Group’s risk management practices. The Group has reviewed its current hedge relationships and concluded that all existing hedges will continue to qualify for hedge accounting under MFRS 9. • the Group and Company have performed initial assessment on the expected impact from the application of ECL on the Group and Company’s financial assets. Based on the assessments undertaken to date, the Group and the Company do not expect significant increase in the allowance for receivables. The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Group’s disclosures about its financial instruments particularly in the year of the adoption of the new standard. The Group will apply the new rules retrospectively from 1 February 2018, with the practical expedients permitted under the standard. Comparatives for financial year ended 31 January 2017 will not be restated. Corporate Overview Stewardship Governance Accountability 127 Yinson Holdings Berhad Annual Report 2018