AL-SALAM REIT ANNUAL REPORT 2018

AL-SALĀM REIT ANNUAL REPORT 2018 128 When an asset is uncollectible, it is written of against the related allowance account. Such assets are written of after all the necessary procedures have been completed and the amount of the loss has been determined. Assets classified as AFS The Group and the Fund assess at the end of the reporting period whether there is objective evidence that a inancial asset or a group of inancial assets is impaired. For debt securities, the Group and the Fund use criteria and measurement of impairment loss applicable for ‘assets carried at amortised cost’ above. If, in a subsequent period, the fair value of a debt instrument classiied as AFS increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in proit or loss, the impairment loss is reversed through proit or loss. Accounting policies applied from 1 January 2018 (ii) Signiicant increase in credit risk The Group and the Fund consider the probability of default upon initial recognition of asset and whether there has been a signiicant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a signiicant increase in credit risk, the Group and the Fund compare the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportable forward-looking information. The following indicators are incorporated: • internal credit rating • external credit rating (as far as available) • actual or expected signiicant adverse changes in business, inancial or economic conditions that are expected to cause a signiicant change to the debtor’s ability to meet its obligations • actual or expected signiicant changes in the operating results of the debtor • signiicant increases in credit risk on other inancial instruments of the same debtor • signiicant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements • signiicant changes in the expected performance and behaviour of the debtor, including changes in the payment status of debtor in the group and changes in the operating results of the debtor. Macroeconomic information (such as market interest rates or growth rates) is incorporated as part of the internal rating model. Regardless of the analysis above, a signiicant increase in credit risk is presumed if a debtor is more than 30 days past due in making a contractual payment. (iii) Deinition of default and credit-impaired inancial assets The Group and the Fund deine a inancial instrument as default, which is fully aligned with the deinition of credit-impaired, when it meets one or more of the following criteria: Quantitative criteria: The Group and the Fund deine a inancial instrument as in default, when the counterparty fails to make contractual payment within 90 days of when they fall due.