FRONTKEN CORPORATION BERHAD 200401012517 (651020-T) ANNUAL REPORT 2024 123 NOTES TO THE FINANCIAL STATEMENTS (CONT’D) 28. FINANCIAL INSTRUMENTS (CONT’D) (a) Financial Risk Management Policies (Cont’d) Credit Risk (Cont’d) (iii) Assessment of impairment losses (Cont’d) • Other receivables (Cont’d) Inputs, Assumptions and Techniques used for Estimating Impairment Losses (Cont’d) The Group and the Company use 3 categories to re ect their credit risk and how the loss allowance is determined for each category: Category Definition of Category Loss Allowance Performing: Receivables have a low risk of default and a strong capacity to meet contractual cash ows 12-months expected credit losses Underperforming: Receivables for which there is a signi cant increase in credit risk Lifetime expected credit losses Not performing: There is evidence indicating the receivable is credit impaired or more than 90 days past due Lifetime expected credit losses The Group and the Company measure the expected credit losses of receivables having signi cant balances, receivables that are credit impaired and receivables with a high risk of default on an individual basis. The remaining receivables are grouped based on shared credit risk characteristics and assessed on a collective basis. Loss allowance is measured on either 12-month expected credit losses or lifetime expected credit losses, by considering the likelihood that the receivable would not be able to repay during the contractual period (probability of default, PD), the percentage of contractual cash ows that will not be collected if default happens (loss given default, LGD) and the outstanding amount that is exposed to default risk (exposure at default). In deriving the PD and LGD, the Group and the Company consider the receivable’s past payment status and its nancial condition as at the reporting date. The PD is adjusted to re ect current and forward-looking information on macroeconomic factors affecting the ability of the receivable to settle its debts using the linear regressive analysis. The Group and the Company have identi ed the Gross Domestic Product as the key macroeconomic factor of the forward-looking information. There are no signi cant changes in the estimation techniques and assumptions as compared to the previous nancial year. Allowance for Impairment Losses Based on the assessment performed, the identi ed impairment loss was immaterial and hence, it is not provided for.
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