FGV Annual Report 2018

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 347 01 02 05 03 07 06 04 08 09 ANNUAL INTEGRATED REPORT 2018 EXAMINED OUR NUMBERS 62 FIRST TIME ADOPTION OF MFRS FRAMEWORK (CONTINUED) Impact of first time adoption of MFRS framework (continued) (b) Change in accounting policy upon application of MFRS 9 (continued) (i) Classification and measurement of financial assets (continued) To reflect this change in accounting policies, theGroup and the Company havemade the following reclassification of financial assets upon application of MFRS 9: • Reclassification of investment in debt securities from AFS to FVPL Investment in debt securities were reclassified fromAFS to financial assets at FVPL because their contractual cash flows do not represent solely payment of principal and interest ( ‘ SPPI ’ ). Related fair value gains were transferred from AFS reserves, along with the related deferred tax expense impact, to retained earnings on 1 January 2018. • Reclassification of investment in non-trading equity securities from AFS to FVOCI The Group and the Company elected to present in OCI changes in the fair value of all its investments in equity securities previously classified as AFS, because these investments are not held for trading or arise from contingent consideration recognised by acquirer in business combination. As a result, investments in these equity securities were reclassified from AFS financial assets to financial assets at FVOCI. Related AFS reserves were reclassified to FVOCI reserve on 1 January 2018. (ii) Impairment of financial assets Until 31 December 2017, the Group and the Company assessed the impairment of loans and receivables and AFS financial assets based on the incurred impairment loss model. Note 3(h) sets out the details of accounting policies for impairment of financial assets under FRS 139. From 1 January 2018, the Group and the Company apply expected credit loss ( ‘ ECL ’ ) model to determine impairment on investment in debt instruments that are measured at amortised cost and at FVOCI. The new accounting policies for impairment under MFRS 9 are set out in Note 3(h). • Trade receivables and contract assets that do not contain significant financing components For all trade receivables and contract assets that do not contain significant financing components, the Group and the Company apply the MFRS 9 simplified approach which is to measure the loss allowance at an amount equal to lifetime ECL at initial recognition and throughout its life. This resulted in the recognition of additional loss allowances for trade receivables on 1 January 2018.