291 INTEGRATED ANNUAL REPORT 2024 Key Messages Financial Statements Other Information NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024 Overview of Wasco Berhad Value Creation Commitment to Governance Sustainability Journey 43 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Credit risk (continued) (b) Intercompany balances (continued) Management has taken reasonable steps to ensure that the recoverability of intercompany receivables are high. As at 31 December 2024 and 31 December 2023, the amounts owing by subsidiaries were considered performing, except for certain subsidiaries. For movement of allowance for impairment of amount owing by subsidiaries, refer to Note 14(a). Advances to subsidiaries that are repayable on demand and interest-free are classified as amortised cost in the Company’s financial statements because the Company’s business model is to hold and collect the contractual cash flows and those cash flows represent solely payments of principal and interest. The Company applied 12 month ECL for these advances to subsidiaries. There is no loss allowance recognised on these advances to subsidiaries as all strategies indicate that the Company could fully recover the outstanding balance of the advances to subsidiaries. Advances to subsidiaries in the Company’s separate financial statements are assessed on individual basis for ECL measurement, as credit risk information is obtained and monitored based on each advances to subsidiary. (c) Derivative financial instruments Transactions involving derivative financial instruments are with approved financial institutions and reputable banks. As at the end of the reporting period, the maximum exposure to credit risk arising from derivatives financial assets is represented by the carrying amounts in the statement of financial position. In view of the counterparties being reputable licensed financial institutions, management does not expect any of the counterparties to fail to meet their obligations. (d) Financial guarantees The Company provides unsecured financial guarantees to banks in respect of banking facilities granted to certain subsidiaries. The Company monitors on an ongoing basis the results of the subsidiaries and repayment made by the subsidiaries. The maximum exposure to credit risk amounts to RM297,397,000 (2023: RM368,960,000) representing banking facilities utilised by the subsidiaries as at the end of the financial year. Financial guarantee contracts are recognised initially as a liability at fair value. Subsequent to initial recognition, the liability is measured at the higher of the amount determined in accordance with the ECL model under MFRS 9 ‘Financial Instruments’ and the amount initially recognised less cumulative amount of income recognised in accordance with the principles of MFRS 15 ‘Revenue from Contracts with Customers’, where appropriate.
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