Yinson Annual Report 2020

225 Annual Report 2020 2. Summary of significant accounting policies (continued) 2.17 Financial instruments (continued) (ii) Impairment of financial assets (continued) ECL represent a probability-weighted estimate of the difference between the present value of cash flows according to contracts and the present value of cash flows the Group and the Company expect to receive, over the remaining life of the financial instrument. For financial guarantee contracts, the ECL is the difference between the expected payments to reimburse the holder of the guaranteed debt instrument less any amounts that the Company expects to receive from the holder, the debtor or any other party. The measurement of ECL reflects: • an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; • the time value of money; and • reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. (a) General 3-stage approach for other receivables At each reporting date, the Group and the Company measures loss allowance at an amount equal to 12 month ECL if credit risk on a financial instrument or a group of financial instruments has not increased significantly since initial recognition. For all other financial instruments, a loss allowance at an amount equal to lifetime ECL is required. The general 3-stage approach is applied for debt instruments at amortised cost other than trade receivables. The Group and the Company considers the probability of default upon initial recognition of the asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk, the Group and the Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportable forward-looking information. The following indicators are incorporated: • internal credit rating • external credit rating (as far as available) • actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the debtor’s ability to meet its obligations • actual or expected significant changes in the operating results of the debtor • significant increases in credit risk on other financial instruments of the same debtor • significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements • significant changes in the expected performance and behaviour of the debtor, including changes in the payment status and changes in the operating results of the debtor