39. FAIR VALUE MEASUREMENT Determination of fair values of financial instruments The fair values of financial instruments measured at amortised cost are derived as follows: Non-current financial instruments - Estimated by discounting expected future cash flows at market incremental lending rate for similar types of lending, borrowing or leasing arrangements at the reporting date; or Current financial instruments - Reasonable approximation of their carrying values as they are either floating rate financial instruments which are repriced to market interest rates, short-term in nature or are repayable on demand. The fair value measurement hierarchies used to measure assets and liabilities carried at fair value in the statements of financial position are as follows: (a) Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities (b) Level 2 Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable (c) Level 3 Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable Level 1 Level 2 Level 3 Total RM’000 RM’000 RM’000 RM’000 Group 31 December 2021 Assets measured at fair value: Hotel buildings – – 485,000 485,000 Other investments 166,700 – 887 167,587 Investment properties – – 1,411,198 1,411,198 31 December 2020 Assets measured at fair value: Hotel buildings – – 485,000 485,000 Other investments 150,974 – 887 151,861 Investment properties – – 1,524,337 1,524,337 39. FAIR VALUE MEASUREMENT (CONT’D.) Determination of fair values of financial instruments (cont’d.) Current financial instruments (cont’d) Description of valuation techniques used and key inputs to valuation on investment properties is as disclosed in Note 17. There were no transfers between Level 1, Level 2 and Level 3 during the financial year. 40. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group and the Company are exposed to financial risks arising from their operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk, interest rate risk and foreign currency risk. The Board of Directors reviews and agrees policies and procedures for the management of these risks, which are executed by the Managing Director. The Risk Management Committee provides independent oversight to the effectiveness of the risk management process. The following sections provide details regarding the Group’s and the Company’s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks. (a) Credit risk Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s and the Company’s exposure to credit risk arises primarily from trade and other receivables. Credit risks with respect to trade receivables are limited as the legal title to the properties sold remain with the Group until the purchase consideration is fully paid. As for other receivables, the credit risk is minimised via dealing with counterparties with appropriate credit, payment histories and other relevant information. For cash and bank balances, the Group and the Company minimise credit risk by dealing exclusively with reputable financial institutions. The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. Exposure to credit risk At the reporting date, the Group’s and the Company’s maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the statements of financial position. If necessary, the Group may obtain collaterals from counter-parties as a means of mitigating losses in the event of default. FINANCIAL STATEMENTS NOTES TO THE For the financial year ended 31 December 2021 Annual Report 2021 TROPICANA CORPORATION BERHAD FINANCIAL STATEMENTS AND OTHER INFORMATION 336 337
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