Yinson Annual Report 2019

Yinson Holdings Berhad ANNUAL REPORT 2019 200 42. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (b) Credit risk (continued) (ii) Debt instruments at amortised costs other than trade receivables ECL for debt instruments at amortised costs other than trade receivables aremeasured using general 3-stage approach. The Group and the Company use three categories which reflect their credit risk and how the loss allowance is determined for each of those categories. A summary of the assumptions underpinning the Group’s and the Company’s ECL model is as follows: Category Group’s and Company’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 if presumed the forward looking information and indicators available signify impairment to debtor’s ability to repay. Lifetime ECL Not performing Debtor’s ability to repay or likelihood of repayment is determined as fully impaired according to the available indicators. Lifetime ECL (credit impaired) Based on the above, loss allowance is measured on either 12 month ECL or lifetime ECL using a PD x LGD x EADmethodology as follows: • PD (‘probability of default’) – the likelihood that the debtor would not be able to repay during the contractual period; ● • LGD (‘loss given default’) – the percentage of contractual cash flows that will not be collected if default happens; and ● • EAD (‘exposure at default’) – the outstanding amount that is exposed to default risk. In deriving the PD and LGD, the Group and the Company consider historical data by each debtor by category and adjusts for forward-looking macroeconomic data. The Group and the Company have identified the industry and geographical area which the debtor operates in, to be themost relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors. Loss allowance is measured at a probability-weighted amount that reflects the possibility that a credit loss occurs and the possibility that no credit loss occurs. No significant changes to estimation techniques or assumptions were made during the reporting period. For the financial year ended 31 January 2019 Notes to the financial statements (cont’d)