MISC Annual Report 2017

NOTES TO THE FINANCIAL STATEMENTS 199 Financial Statements 2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.) 2.4 Pronouncements not yet in effect (cont'd.) (i) MFRS 9: Financial Instruments (cont'd.) (i) Classification and measurement (cont'd.) The equity shares in non-listed companies are intended to be held for the foreseeable future. No impairment losses were recognised in profit or loss during prior periods for these investments. The Group will apply the option to present fair value changes in OCI, and therefore, the application of MFRS 9 will not have a significant impact. Loans and receivables are held to collect contractual cash flows and are expected to give rise to cash flows representing solely payments of principal and interest. The Group analysed the contractual cash flow characteristics of those instruments and concluded that they meet the criteria for amortised cost measurement. (ii) Impairment The Group will apply the simplified approach and record lifetime expected losses on all trade receivables. The Group is still assessing the impact of impairment based on the expected credit loss model. (iii) Hedge accounting The Group determined that all existing hedge relationships that are currently designated as effective will continue to qualify for hedge accounting under MFRS 9. As MFRS 9 does not change the general principles of how an entity accounts for effective hedges, applying the hedging requirements of MFRS 9 will not have a significant impact on the Group’s financial statements. (ii) MFRS 15: Revenue from Contracts with Customers MFRS 15 replaces the guidance in MFRS 111: Construction Contracts, MFRS 118: Revenue, IC Interpretation 13: Customer Loyalty Programmes, IC Interpretation 15: Agreements for Construction of Real Estate, IC Interpretation 18: Transfers of Assets from Customers and IC Interpretation 131: Revenue – Barter Transactions Involving Advertising Services. MFRS 15 provides a single model for accounting for revenue arising from contracts with customers, focusing on the identification and satisfaction of performance obligations. MFRS 15 is effective for annual periods beginning on or after 1 January 2018. The Group decided to apply MFRS 15 retrospectively with cumulative effect on initially applying this standard as an adjustment to the opening balance of retained earnings of the annual reporting period that includes the date of initial application. Under this transition method, the Group will apply this standard retrospectively only to contracts that are not completed at the date of initial application (i.e. 1 January 2017). Based on the preliminary initial assessment, the Group does not expect the application of MFRS 15 to have a significant impact on financial statements except for extensive new disclosure in financial statements, in particular information about the Group's remaining performance obligations.