KENANGA ANNUAL REPORT 2020

171 ANNUAL REPORT 2020 // KENANGA INVESTMENT BANK BERHAD 4. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D.) (iii) The measurement of impairment losses under MFRS 9 on financial assets subject to impairment assessment requires judgement, in particular, the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in different levels of allowances. (cont’d.) Overlays and adjustments for ECL amidst COVID-19 environment (cont’d.) The customers who have received repayment supports remain in their existing stages unless they have been individually identified as not viable or with subsequent indicators of significant increase in credit risk from each of their pre-COVID-19 status. The overlays were generally made at portfolio level in determining the sufficient level of ECL. The adjusted downside scenario assumes a continuous restrictive economic environment due to COVID-19 in 2021. Total overlays for ECL inclusive of the macro-economic adjustments maintained by the Group as at 31 December 2020 are RM3.2 million (2019: nil). The scenarios applied in management overlay in estimating the reported ECL arising from COVID-19 uncertainties are set out in the table as follow: Scenarios Additional ECL RM’000 1 Assigned higher LGD for exposures under moratorium 2,250 2 Drop in counterparty ratings 395 3 Stressed security cover for exposures under moratorium 557 Total 3,202 (iv) The Group and the Bank estimate the useful lives of property, plant and equipment and software based on factors such as the expected level of usage due to physical wear and tear, future technological developments and legal or other limits on the use of the relevant assets. Future results of operations could be materially affected by changes in these estimates brought about by changes in the factors mentioned. A reduction in the estimated useful lives of property, plant and equipment, and software would increase the recorded depreciation and decrease their carrying value. The total carrying amounts of property, plant and equipment, and software are disclosed in Notes 16 and 17 respectively. (v) Deferred tax assets are recognised for all unutilised tax losses and unabsorbed capital allowances to the extent that it is probable that taxable profit will be available against which the tax losses and unabsorbed capital allowances can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. As at financial year end, the total carrying value of unutilised tax losses and unabsorbed capital allowances are disclosed in Note 19.