MISC Annual Report 2018

NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS HIGHLIGHTS OF THE YEAR OUR BUSINESS OUR LEADERSHIP OUR PERFORMANCE OUR COMMITMENT TO SUSTAINABILITY OUR GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 50 TH ANNUAL GENERAL MEETING 251 MISC BERHAD ANNUAL REPORT 2018 250 2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.) 2.3 Summary of significant accounting policies (cont'd.) (y) Financial assets (MFRS 139) (cont'd.) Initial recognition (cont'd.) Financial assets are recognised initially at fair value plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace concerned (regular way of purchases) are recognised on the trade date, i.e. the date that the Group commits to purchase or sell the asset. The Group's financial assets include cash, deposits and bank balances, trade and other receivables, loans, quoted and unquoted financial instruments, finance lease receivables and derivative financial instruments. Subsequent measurement The subsequent measurement of financial assets depends on their classification as follows: (i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss comprise financial assets that are held for trading, including derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) and financial assets that are specifically designated into this category upon initial recognition. Financial assets, categorised as fair value through profit or loss are subsequently measured at their fair value, with gains or losses recognised in the income statement. The Group's financial assets at fair value through profit or loss include derivative assets. (ii) Loans and receivables Loans and receivables comprise debt instruments that are not quoted in an active market. Subsequent to initial recognition, financial assets categorised as loans and receivables are measured at amortised cost using the effective interest rate method. The Group's loans and receivables include cash, deposits and bank balances, trade and other receivables, loans and finance lease receivables. (iii) Held-to-maturity investments Held-to-maturity investments comprise debt instruments that are quoted in an active market and the Group has positive intention and ability to hold the assets to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest rate method. The Group did not have any held-to-maturity investments as at 31 December 2017. 2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.) 2.3 Summary of significant accounting policies (cont'd.) (y) Financial assets (MFRS 139) (cont'd.) Subsequent measurement (cont'd.) (iv) Available-for-sale financial assets Available-for-sale financial assets comprise investments in equity and debt instruments that are not classified in any of the three preceding categories. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less impairment loss. Other financial assets categorised as available-for-sale are subsequently measured at fair value, with unrealised gains and losses recognised directly in other comprehensive income and accumulated under available-for-sale reserve in equity until the investment is derecognised or determined to be impaired, at which time the cumulative gain or loss previously recorded in equity is reclassified to the income statement. The Group and the Corporation have designated their non-current investments as available-for-sale financial assets as at 31 December 2017. All financial assets, except for those measured at fair value through profit or loss, are subject to review for impairment as described in Note 2.3(z). (z) Impairment of financial assets (MFRS 139) All financial assets (except for financial assets categorised as fair value through profit or loss, investments in subsidiaries, investments in associates and investments in joint ventures) are assessed at each reporting date to determine whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the asset. Losses expected as a result of future events, no matter how likely, are not recognised. For an investment in an equity instrument, a significant or prolonged decline in the fair value below its cost is an objective evidence of impairment. If any such objective evidence exists, then the financial asset’s recoverable amount is estimated. An impairment loss in respect of loans and receivables and held-to-maturity investments is recognised in the income statement and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. An impairment loss in respect of available-for-sale financial assets is recognised in the income statement and is measured as the difference between the asset’s acquisition cost (net of any principal repayment and amortisation) and the asset’s current fair value, less any impairment loss previously recognised. Where a decline in the fair value of an available-for-sale financial asset has been recognised in other comprehensive income, the cumulative loss in other comprehensive income is reclassified from equity to the income statement. An impairment loss in respect of unquoted equity instrument that is carried at cost is recognised in the income statement and is measured as the difference between the financial asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Impairment losses recognised in the income statement for an investment in an equity instrument classified as available-for-sale is not reversed through the income statement in the subsequent periods.