FGV Audited Financial Statements 2019

72 FGV HOLDINGS BERHAD NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 4 FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Financial risk management policies (continued) Credit risk (continued) (i) Impairment of financial assets (continued) b) Other receivables, loans due from intercompany and non-trade amounts due from intercompany using general 3-stage approach (continued) A summary of the assumptions underpinning the Group’s ECL model is as follows: Category Group’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 interest and/or principal repayments are 30 days past due Lifetime ECL Non-performing Interest and/or principal repayments where there is evidence indicating the asset is credit-impaired Lifetime ECL (credit-impaired) Write-off There is evidence indicating that there is no reasonable expectation of recovery based on unavailability of debtor’s sources of income or assets to generate sufficient future cash flows to repay the amount Asset is written off Based on the above, loss allowance is measured on either 12 month ECL or lifetime ECL incorporating the methodology below: • PD (‘probability of default’) – the likelihood that the debtor would not be able to repay during the contractual period; • LGD (‘loss given default’) – the percentage of contractual cash flows that will not be collected if default happens; and • EAD (‘exposure at default’) – the outstanding amount that is exposed to default risk. 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. Impairment losses on financial assets are presented as net impairment losses within operating profit. Subsequent recoveries of amounts previously written off of financial assets are credited against the same line item. (ii) Credit risk exposures The maximum credit risk exposures for the financial assets equal to their respective carrying values after ECL. The details of ECL impact to the financial assets are disclosed in the respective financial assets’ notes as applicable.