34. FINANCIAL INSTRUMENTS (CONTINUED) 34.4 Credit risk (continued) Cash and cash equivalents The cash and cash equivalents are held with banks and financial institutions. As at the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statements of financial position. These banks and financial institutions have low credit risks. In addition, some of the bank balances are insured by government agencies. Consequently, the Group and the Company are of the view that the loss allowance is not material and hence, it is not provided for. Inter-company balances Risk management objectives, policies and processes for managing the risk The Company provides unsecured loans and advances to subsidiaries. The Company monitors the ability of the subsidiaries to repay the loans and advances on an individual basis. Exposure to credit risk, credit quality and collateral As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position. Recognition and measurement of impairment losses The Company applies the 3-stage general approach to measure expected credit losses for all inter-company balances. The Company measures the expected credit losses on individual basis, which is aligned with its credit risk management practices on the inter-company balances. Generally, the Company considers loans and advances to subsidiaries have low credit risk. The Company assumes that there is a significant increase in credit risk when a subsidiary’s financial position deteriorates significantly. As the Company is able to determine the timing of payments of the subsidiaries’ loans and advances when they are payable, the Company considers the loans and advances to be in default when the subsidiaries are not able to pay when demanded. The Company considers a subsidiary’s loan or advance to be credit impaired when the subsidiary is unlikely to repay its loan or advance to the Company in full. The Company determines the probability of default for these loans and advances individually using internal information available. Financial Statements DAGANG NeXCHANGE BERHAD 286 NOTES TO THE FINANCIAL STATEMENTS
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