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Notes to the
Financial Statements
As at 31 March 2020
Fima CORPORATION Berhad
(197401004110)
(21185-P)
• Annual Report 2020
131
2.
Significant accounting policies (cont’d.)
2.4 Summary of significant accounting policies (cont’d.)
(j) Financial assets (cont’d.)
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily
derecognised (i.e., removed from the Group’s and the Company’s statement of financial position) when:
-
The rights to receive cash flows from the asset have expired; or
-
The Group and the Company have transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’
arrangement; and either (a) the Group and the Company have transferred substantially all the risks and rewards
of the asset, or (b) the Group and the Company have neither transferred nor retained substantially all the risks and
rewards of the asset, but has transferred control of the asset.
When the Group and the Company have transferred its rights to receive cash flows from an asset or has entered into a
pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When
it has neither nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset,
the Group and the Company continue to recognise the transferred asset to the extent of its continuing involvement. In
that case, the Group and the Company also recognise an associated liability. The transferred asset and the associated
liability are measured on a basis that reflects the rights and obligations that the Group and the Company have retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the
original carrying amount of the asset and the maximum amount of consideration that the Group and the Company could
be required to repay.
(k)
Impairment of financial assets
The Group and the Company recognise an allowance for expected credit losses (“ECLs”) for all debt instruments
not held at fair value through profit or loss. ECLs are based on difference between the contractual cash flows due in
accordance with the contract and all the cash flows that the Group and the Company expect to receive, discounted at
an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of
collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk
since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the
next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk
since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure,
irrespective of the timing of the default (a lifetime ECL).
For trade receivables and contract assets, the Group and the Company apply a simplified approach in calculating ECLs.
Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs
at each reporting date. The Group and the Company have established a provision matrix that is based on its historical
credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.