Wah Seong Corporation Berhad Annual Report 2019

109 ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.18 Financial assets (a) Classification The Group and the Company classify its financial assets in the following measurement categories: at fair value through profit or loss and at amortised cost. The classification depends on the nature of the entity’s business model for managing the financial assets and the contractual terms of the cash flows. The Group and the Company reclassify debt investments when and only when its business model for managing those assets changes. (b) Recognition and initial measurement Regular way purchases and sales of financial assets are recognised on the trade date. The trade date refers to the date on which the Group and the Company commit to purchase or sell the asset. Financial assets are initially recognised at fair value plus transaction cost that are directly attributable to the acquisition of the financial assets except for financial assets at fair value through profit or loss. Transaction costs for financial assets measured at fair value through profit or loss are recognised immediately as expenses within profit or loss. (c) Subsequent measurement (i) Debt instruments at amortised cost After initial recognition, financial assets that are held for collection of contractual cash flows where those cash flows represent solely payment of principal and interest are measured at amortised cost using the effective interest method. Any gain or loss arising on derecognition is recognised directly in profit or loss. Impairment losses are recognised in profit or loss within ‘cost of sales’ or ‘administrative and general expenses’. (ii) Debt instruments at fair value through profit or loss Subsequent to initial recognition, financial assets that do not meet the criteria for amortised cost or fair value through other comprehensive income are measured at fair value through profit or loss. Any gains or losses arising from changes in fair value are recognised in profit or loss within ‘other gains/(losses) - net’. Exchange differences, interest and dividend income on financial assets at fair value through profit or loss are recognised separately in profit or loss. (iii) Equity instruments The Group and the Company subsequently measure all equity investments at fair value. Where the Group’s and the Company’s management have elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the Group’s and the Company’s right to receive payments is established. Changes in the fair value of financial assets at fair value through profit or loss are recognised in profit or loss within ‘other gains/ (losses) - net’. (d) Impairment of financial assets The Group and the Company assess on a forward-looking basis the expected credit loss (“ECL”) associated with the debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. The financial assets of the Group and the Company that are subject to the ECL model are trade and other receivables, contract assets, lease receivables and loans to subsidiaries. While cash and cash equivalents are also subject to the impairment requirements of MFRS 9, the impairment loss is immaterial.