FGV Annual Report 2018

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 183 01 02 05 03 07 06 04 08 09 ANNUAL INTEGRATED REPORT 2018 EXAMINED OUR NUMBERS 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 The Group uses three categories for other receivables which reflect their credit risk and how the loss allowance is determined for each of those categories (3 stage approach). These financial assets are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the group, and a failure to make contractual payments for a period of greater than 365 days past due. 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 Under-performing 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.