MSM Malaysia Holdings Berhad Annual Report 2019

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 23 RECEIVABLES (CONTINUED) The receivables are denominated as follows: Group Company 2019 2018 2019 2018 RM’000 RM’000 RM’000 RM’000 Ringgit Malaysia 265,336 296,330 887 1,143 US Dollar 25,102 19,837 - - Others 135 - - - 290,573 316,167 887 1,143 Credit term of trade receivables range between 30 to 60 days (2018: 30 to 60 days). (a) On 28 February 2014, the Company signed the Gas Supply Agreement (‘GSA’) with a natural gas supplier for the supply and delivery of natural gas to the Company. The GSA is effective from March 2014 and will expire on 31 December 2022. An advance payment of RM8,198,000 was made to the natural gas supplier for the construction of the gas distribution pipeline and metering facilities to enable the supply of the natural gas to the Company.The ownership of the gas distribution pipeline and metering facilities constructed shall remain vested with the natural gas supplier. The advance payment is amortised over 106 months on a straight line basis starting from March 2014 based on the tenure of the GSA. On 20 November 2019, the Board has resolved to cease the operation of its raw sugar refining division of a subsidiary from July 2020 and determined that the advance payment will be amortised over a period of 8 months from November 2019 onwards to June 2020 instead of 38 months from November 2019 to December 2022. The total amortisation expenses incurred during the financial year ended 31 December 2019 amounted to RM1,508,126 (2018: RM928,075). (b) Included in non-current advance payment is an amount of RM301,124 (2018: RM194,000) which is related to down payment paid for purchase of property, plant and equipment. (c) Included in deposits are deposits for sugar futures trading facilities of RM7,181,000 (2018: RM12,037,000). (d) Included in prepayments as at 31 December 2019 is an amount of RM Nil (2018: RM178,000) relating to insurance paid for the construction of the sugar refinery in Johor. (e) Reconciliation of loss allowance (i) Trade receivables using simplified approach The Group and the Company applies MFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles of revenue earned over a period of 24 months before 31 December 2019 or 31 December 2018 respectively and the corresponding historical credit losses experienced within this period.The historical loss rates were not adjusted to reflect forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables, as the Group has not identified any forward looking assumptions which correlate to the historical loss rates. MSM Malaysia Holdings Berhad | Annual Report 2019 188