Press Metal Annual Report 2022

NOTES TO THE FINANCIAL STATEMENTS Cont’d 29. Financial instruments cont’d 29.4 Credit risk cont’d Investments and derivative financial instruments cont’d Exposure to credit risk, credit quality and collateral As at the end of the reporting period, the Group has only invested in domestic securities. The derivative contracts were entered into with approved financial institutions. The maximum exposure to credit risk is represented by the carrying amounts in the statement of financial position. In view of the sound credit rating of counterparties, management does not expect any counterparty to fail to meet its obligations. The Group is of the view that the loss allowance is not material and hence, it is not provided for. The investments are unsecured. Financial guarantees Risk management objectives, policies and processes for managing the risk The Company provides unsecured financial guarantees to banks in respect of banking facilities and credit terms granted to certain subsidiaries. The Company monitors the ability of the subsidiaries to fulfill the contracts and service their repayments on an individual basis. Exposure to credit risk, credit quality and collateral The maximum exposure to credit risk of the Company amounts to RM1,272,723,000 (2021: RM2,350,437,000) as at the end of the reporting period. Recognition and measurement of impairment loss The Company assumes that there is a significant increase in credit risk when a subsidiary’s financial position deteriorates significantly. The Company considers a financial guarantee to be credit impaired when: • The subsidiary is unlikely to repay its credit obligation to the bank in full; or • The subsidiary is unlikely to repay its amounts owing to the supplier in full; or • The subsidiary is continuously loss making and is having a deficit shareholders’ fund. The Company determines the probability of default of the guaranteed loans individually using internal information available. As at the end of the reporting period, there was no indication that any subsidiary would default on repayment. The financial guarantees have not been recognised since the fair value on initial recognition was not material. Inter-company receivables and loans and advances Risk management objectives, policies and processes for managing the risk The Group trades with an associate and provides unsecured advances to an associate. The Company provides unsecured loans and advances to subsidiaries. The Group and the Company monitor the ability of the subsidiaries and associates to repay the loans and advances on an individual basis. ANNUAL REPORT 2022 286

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