Bank Islam Integrated Annual Report 2020

4. CREDIT RISK (CONTINUED) 4.5 Credit Quality of Gross Financing and Advances (continued) (c) Impaired Financing and Advances A financing is classified as impaired when the principal or profit or both are past due for three months or more, or where a financing is in arrears for less than three months, but the financing exhibits indications of significant credit weakness. The financing or group of financings is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the financing (a ‘loss event’) and that the loss event has an impact on the estimated future cash flows of the financing or group of financings that can be reliably estimated. The Group and the Bank first assess individually whether the objective evidence of impairment exists individually for financings which are individually significant, and collectively for financings which are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financing, the financing is included in a group of financings with similar credit risk characteristic and collectively assessed for impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the financing’s carrying amount and the present value of the estimated future cash flows. The carrying amount of the financing is reduced through the use of an allowance account and the amount of the loss is recognised in the statement of profit or loss. Impaired financing by assessment type: Group and Bank 31.12.2020 31.12.2019 RM’000 RM’000 Individually Assessed 219,160 242,430 of which: Month-in-Arrears 0 23,780 35,467 Month-in-Arrears 1 6,659 9,582 Month-in-Arrears 2 17,010 3,647 Month-in-Arrears 3 and above 171,711 193,734 Collectively Assessed 154,074 190,571 373,234 433,001 BANK ISLAM MALAYS IA BERHAD INTEGRATED ANNUAL REPORT 2020 333