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Notes to the financial statements
31 December 2014
Bursa Malaysia
•
Annual Report 2014
107
2. Significant accounting policies (cont’d.)
2.4 Summary of significant accounting policies (cont’d.)
(f) Impairment of financial assets
The Group and the Company assess at each financial year end whether there is any objective evidence that a financial asset is impaired.
(i) Loans and receivables and HTM investments
To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the Company
consider factors such as the probability of insolvency or significant financial difficulties of the debtor, default or significant delay in payments,
and delinquency in interest or principal payments and other financial reorganisation where observable data indicate that there is a measurable
decrease in the estimated future cash flows.
For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently
assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables
could include the Group and the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio
past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.
If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present
value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in profit
or loss.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and other
receivables, and staff loan receivables, where the carrying amount is reduced through the use of an allowance account. When a trade or other
receivable or staff loan receivable becomes uncollectible, it is written off against the allowance account.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be objectively related to an event occurring after
the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does
not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.
(ii) AFS financial assets
To determine whether there is objective evidence that investment securities classified as AFS financial assets are impaired, the Group and the
Company consider factors such as significant and/or prolonged decline in fair value below cost, significant financial difficulties of the issuer or
obligor, and the disappearance of an active trading market.
If an AFS financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation or
accretion) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss.
Impairment losses on AFS equity investments are not reversed in profit or loss in the subsequent periods. Increase in fair value, if any, subsequent
to impairment loss is recognised in other comprehensive income. For AFS debt investments, impairment losses are subsequently reversed
in profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the
impairment loss in profit or loss.
(g) Cash and cash equivalents
Cash and cash equivalents consist of cash at banks and on hand, and short-term deposits used by the Group and the Company in the management
of their short-term funding requirements.