NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2023 186 WE ARE KENANGA LEADERSHIP MESSAGE VALUE CREATION MODEL KENANGA INVESTMENT BANK BERHAD ANNUAL REPORT 2023 4. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D.) Management overlays for ECL The management overlays were taken to reflect the latest macroeconomic outlook not captured in the modelled outcome and the potential impact to delinquencies and defaults after taking into account the uncertainties in the market. The management overlays involved significant level of judgement and reflect the management’s views of possible severities of the economic conditions and paths of recovery in the forward looking assessment for ECL estimation purposes. The management overlays were generally made at portfolio level in determining the sufficient level of ECL. Total management overlays for ECL inclusive of the macro-economic adjustments maintained by the Group and the Bank as at 31 December 2023 are RM7.3 million (2022: RM3.2 million). The scenarios applied in the management overlays in estimating the reported ECL include: (i) Drop in counterparty ratings (ii) Stressed security cover (iii) Uncertainties arising from macroeconomic factors (iv) The Group and the Bank estimate the useful lives of property, plant and equipment and software based on factors such as the expected level of usage due to physical wear and tear, future technological developments and legal or other limits on the use of the relevant assets. Future results of operations could be materially affected by changes in these estimates brought about by changes in the factors mentioned. A reduction in the estimated useful lives of property, plant and equipment, and software would increase the recorded depreciation and decrease their carrying value. The total carrying amounts of property, plant and equipment, and software are disclosed in Notes 16 and 17 respectively. (v) Deferred tax assets are recognised for all unutilised tax losses and unabsorbed capital allowances to the extent that it is probable that taxable profit will be available against which the tax losses and unabsorbed capital allowances can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. As at financial year end, the total carrying value of unutilised tax losses and unabsorbed capital allowances are disclosed in Note 19.
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