KENANGA INVESTMENT BANK BERHAD INTEGRATED ANNUAL REPORT 2024 WE ARE KENANGA OUR SUSTAINABILITY APPROACH LEADERSHIP STATEMENT HOW WE ARE GOVERNED SHAREHOLDERS’ INFORMATION NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2024 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2024 FINANCIAL STATEMENTS ADDITIONAL INFORMATION OUR VALUE CREATION APPROACH 281 280 49. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (CONT’D.) The methods and assumptions used in estimating the fair values of financial instruments are as follows: (i) Financial assets/liabilities for which fair value approximates carrying value The carrying amounts of financial assets and financial liabilities that have a short-term maturity and deposits/accounts without a specific maturity, approximate fair values. (ii) Financial assets at FVTPL, FVOCI and Amortised Cost The fair values are estimated based on quoted or observable market prices at the reporting date. Where such quoted or observable market prices are not available, the fair values are estimated using pricing models or discounted cash flow techniques. Where discounted cash flow technique is used, the expected future cash flows are discounted using prevailing market rates for a similar instrument at the reporting date. (iii) Derivatives Fair values are estimated based on quoted or observable market prices at the reporting date. Options are valued using Black-Scholes model and Swaps are valued using discounted cash flows. These valuation techniques incorporates various market and observable assumptions including market rate volatility. (iv) Loans, advances and financing The fair values of fixed rate loans with remaining maturity of less than one year and variable rate loans are estimated to approximate their carrying values. For fixed rate loans, advances and financing with remaining maturity of more than one year, the fair values are estimated based on expected future cash flows of contractual installment payments and discounted at applicable prevailing rates at the reporting date offered to new borrowers/customers with similar credit profiles. (v) Deposits from customers The fair values of deposit liabilities payable on demand (demand and savings deposits), or deposits with maturity of less than one year are estimated to approximate their carrying amounts. The fair values of fixed deposits with remaining maturities of more than one year are estimated based on expected future cash flows discounted at applicable prevailing rates offered for deposits of similar remaining maturities. The fair values of Islamic deposits are deemed to approximate their carrying amounts as profit rates are determined at the end of their holding periods based on the profit generated from the assets invested. 49. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (CONT’D.) The methods and assumptions used in estimating the fair values of financial instruments are as follows (cont’d.): (vi) Deposits and placements of banks and other financial institutions The carrying values of these financial instruments with remaining maturity of less than one year approximate their carrying amounts due to the relatively short maturity of the financial instruments. For deposits and placements with maturities of one year and above, the estimated fair value is based on discounted cash flows using prevailing money market interest rates at which similar deposits and placements would be made with financial institutions of similar credit risk and remaining period to maturity. (vii) Borrowings The fair values of borrowings are estimated based on expected future cash flows discounted at applicable variable rates offered for borrowings. 50. SEGMENTAL REPORTING The business segment results are prepared based on the Group’s internal management reporting, which reflect the organisation’s management reporting structure. The Group is organised into five major operating divisions. The division form the basis of which the Group reports its segment information. (i) Investment banking - Investment banking business, treasury and related financial services; (ii) Stockbroking - Dealings in securities and investment related services; (iii) Listed derivatives - Futures broking; (iv) Asset and Wealth Management - Management of funds, unit trusts and robo-advisory; and (v) Corporate and others - Money lending and financing, e-Services management platform, support services comprising all middle and back office functions costs that are not allocated out to business segments and include business operations conducted by the Group’s associates in the Kingdom of Saudi Arabia, Malaysia and Sri Lanka and joint ventures, Rakuten Trade Sdn Bhd and Rakuten Trade Singapore Pte. Ltd. Rakuten Trade Singapore Pte. Ltd was disposed on 6 September 2024 and has now become a wholly-owned subsidiary of Rakuten Trade Sdn Bhd. Refer to Note 56(a)(i). Except as indicated above, no operating segments have been aggregated to form the above reportable operating segments. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which, in certain respects as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements. Group income taxes are managed on group basis and are not allocated to operating segments. Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.
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