Notes to the Financial Statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023 45 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Credit risk (continued) (a) Receivables (continued) General 3-stage approach for other debt instruments financial assets ECL for other debt instruments financial assets at amortised costs, which include other receivables, non-trade intercompany balances including amounts owing by subsidiaries, amounts owing by associates and amounts owing by joint ventures, time deposits and cash and bank balances are measured using general 3-stage approach. The Group and the Company use three categories to reflect their credit risk and how the loss allowance is determined for each of those categories. A summary of the assumptions underpinning the Group’s and the Company’s ECL model is as follows: Category Group’s and Company’s definition of category Basis for recognising ECL Performing Debtors have a low risk of default and a strong capacity to meet contractual cash flows. 12 month ECL Underperforming Debtors for which there is a significant increase in credit risk or significant increase in credit risk is presumed if the forward-looking information and indicators available signify impairment to debtors’ ability to repay. Lifetime ECL Not performing Debtors’ ability to repay or likelihood of repayment is determined as fully impaired when it meets one or more of the indicators in accounting policy 2.17(d). Lifetime ECL (credit impaired) Based on the above, loss allowance is measured on either 12 month ECL or lifetime ECL using a PD x LGD x EAD methodology as follows: l PD (“probability of default”) – the likelihood that the debtor would not be able to repay during the contractual period; l LGD (“loss given default”) – the percentage of contractual cash flows that will not be collected if default happens; and l EAD (“exposure at default”) – the outstanding amount that is exposed to default risk. In deriving the PD and LGD, the Group and the Company consider available, reasonable and supportive forward-looking information, such as: l significant changes in the expected performance and behaviour of the debtor, including changes in the payment status of debtor and changes in the business of the debtor; and l debtor’s past history and existing market conditions. 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 2023 and 31 December 2022, 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 14, 15(a), 16 and 17(a) respectively. 279 Wasco Berhad
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