ENRA Group Berhad Annual Report 2019

134 ENRA GROUP BERHAD ∞ Annual Report 2019 page Notes to the Financial Statement 31 March 2019 41. FINANCIAL INSTRUMENTS (cont’d) (a) Capital management (cont’d) The Group and the Company monitor capital using a gearing ratio, which is total external borrowings and divided by total equity. The policy of the Group and the Company is to keep the gearing ratio within manageable levels. At the end of the reporting period, the Group’s and the Company’s gearing ratio is 0.14 times (2018: 0.46 times) and 0.02 times (2018: 0.39 times) respectively. Pursuant to the requirements of Practice Note No. 17/2005 of the Bursa Malaysia Securities, the Group is required to maintain a consolidated shareholders’ equity equal to or not less than the 25% of the issued and paid-up capital (excluding treasury shares) and such shareholders’ equity is not less than RM40.0 million. The Group has complied with this requirement for the financial year ended 31 March 2019. (b) Types of financial instruments A financial instrument is any contract that gives rise to a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. A financial asset is any asset that is cash, an equity instrument of another enterprise, a contractual right to receive cash or another financial asset from another enterprise, or a contractual right to exchange financial assets or financial liabilities with another enterprise under conditions that are potentially favourable to the Group. A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise, or a contractual obligation to exchange financial assets or financial liabilities with another enterprise under conditions that are potentially unfavourable to the Group. Financial instruments are recognised on the statement of financial position when the Group has become a party to the contractual provisions of the instrument. At initial recognition, a financial instrument is recognised at fair value plus, in the case of a financial instrument not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issuance of the financial instrument. (i) Financial assets When financial assets are initially recognised, they are measured at fair value, plus, in the case of financial assets not at Fair Value Through Profit or Loss (FVTPL), directly attributable transaction costs. The Company determines the classification of financial assets upon initial recognition. The measurement for each classification of financial are as below: (i) Financial assets measured at amortised cost Financial assets that are debt instruments are measured at amortised cost if they are held within a business model whose objective is to collect contractual cash flows and have contractual terms which give rise on specific dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Subsequent to initial recognition, financial assets are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss through the amortisation process. Financial assets are carried net of any impairment losses if any.