210 NOTES TO THE FINANCIAL STATEMENTS (CONT’D) For the financial year ended 31 January 2023 YINSON HOLDINGS BERHAD | INTEGRATED ANNUAL REPORT 2023 2. Summary of significant accounting policies (continued) 2.17 Financial instruments (continued) (ii) Impairment of financial assets (continued) (b) Simplified approach for trade receivables and contract assets The Group and the Company apply the MFRS 9 simplified approach to measure ECL which uses a lifetime ECL for all trade receivables and contract assets. The Group and the Company define a financial instrument as default, which is fully aligned with the definition of credit-impaired, when it meets one or more of the following criteria: (i) Quantitative criteria The Group and the Company define a financial instrument as being in default, when the counterparty fails to make contractual payment within 90 days of when they fall due. (ii) Qualitative criteria The debtor meets unlikeliness to pay criteria, which indicates the debtor is in significant financial difficulty. The Group and the Company consider the following instances: • the debtor is in breach of financial covenants; • concessions have been made by the lender relating to the debtor’s financial difficulty; • it is becoming probable that the debtor will enter bankruptcy or other financial reorganisation; and • the debtor is insolvent. Financial instruments that are credit-impaired are assessed on individual basis. Note 41(b) sets out the measurement details of ECL. (iii) Financial liabilities (a) Initial recognition and measurement Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, lease liabilities, financial guarantee contracts and derivative financial instruments.
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