NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022 45 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Credit risk (continued) (a) Receivables (continued) General 3-stage approach for other debt instruments financial assets (continued) Loss allowance is measured at a probability-weighted amount that reflects the possibility that a credit loss occurs and the possibility that no credit loss occurs. No significant changes to estimation techniques or assumptions were made during the reporting period. There is no loss allowance for other financial asset at amortised cost as at 31 December 2022 and 31 December 2021, except for trade and other receivables, amounts owing by subsidiaries, amounts owing by associates and amounts owing by joint ventures. For movement of allowance for impairment of trade and other receivables, amounts owing by subsidiaries, amounts owing by associates and amounts owing by joint ventures, refer to Note 15, 16(a), 17 and 18(a) respectively. (b) Intercompany balances The Company provides unsecured loans and advances to subsidiaries. The Company monitors the results of its subsidiaries regularly. As at 31 December 2022 and 31 December 2021, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position. Management has taken reasonable steps to ensure that intercompany receivables are stated at the realisable values. As at 31 December 2022 and 31 December 2021, 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 16(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 the general 3-stage approach when determining 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. Annual Report 2022 Wah Seong Corporation Berhad 199
RkJQdWJsaXNoZXIy NDgzMzc=