Frontken Corporation Berhad 200401012517 (651020-T) • A N N U A L R E P O R T 2 0 2 1 148 NOTES TO THE FINANCIAL STATEMENTS (CONT’D) 27. FINANCIAL INSTRUMENTS (CONT’D) (a) Financial Risk Management Policies (Cont’d) Credit Risk (Cont’d) (iii) Assessment of impairment losses (Cont’d) • Amount owing by subsidiaries The Company applies the 3-stage general approach to measuring expected credit losses for all inter-company balances. Generally, the Company considers loans and advances to subsidiaries have low credit risks. The Company assumes that there is a significant increase in credit risk when a subsidiary’s financial position deteriorates significantly. As the Company is able to determine the timing of payments of the subsidiaries’ loans and advances when they are payable, the Company considers the loans and advances to be in default when the subsidiaries are not able to pay when demanded. The Company considers a subsidiary’s loan or advance to be credit impaired when the subsidiary is unlikely to repay its loan or advance in full or the subsidiary is continuously loss making or the subsidiary is having a deficit in its total equity. The Company determines the probability of default for these loans and advances individually using internal information available. The information about the exposure to credit risk and the loss allowances calculated for the amount owing by subsidiaries are summarised below:- Gross Lifetime Loss Carrying Amount Allowance Amount The Company RM RM RM 2021 Low credit risk 7,164,079 (2,989,079) 4,175,000 2020 Low credit risk 31,777,877 (2,989,079) 28,788,798 The movements in the loss allowances are disclosed in Note 18 to the financial statements. • Financial Guarantee Contracts All of the financial guarantee contracts are considered to be performing, have low risks of default and historically there were no instances where these financial guarantee contracts were called upon by the parties of which the financial guarantee contracts were issued to. Accordingly, no loss allowances were identified based on 12-month expected credit losses.
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