FGV Annual Report 2018

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 150 FGV HOLDINGS BERHAD EXAMINED OUR NUMBERS 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The principal accounting policies applied in the preparation of financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (continued) (h) Financial assets (continued) Impairment (continued) (ii) Significant increase in credit risk (continued) The following indicators are incorporated: - internal credit rating; - external credit rating (as far as available); - actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the debtor’s ability to meet its obligations; - actual or expected significant changes in the operating results of the debtor; - significant increases in credit risk on other financial instruments of the same debtor; - significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements; - significant changes in the expected performance and behaviour of the debtor, including changes in the payment status of debtor in the group and changes in the operating results of the debtor. Macroeconomic information (such as market interest rates or growth rates) is incorporated as part of the internal rating model as applicable. Regardless of the analysis above, a significant increase in credit risk is presumed if a debtor is more than 30 days past due in making a contractual payment. (iii) Definition of default and credit-impaired financial assets The Group defines a financial instrument as default, which is fully aligned with the definition of credit-impaired, when the debtor meets unlikeliness to pay criteria, which indicates the debtor is in significant financial difficulty. The Group considers 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 • the debtor is insolvent Financial instruments that are credit-impaired are assessed on individual basis.