186 KENANGA INVESTMENT BANK BERHAD INTEGRATED ANNUAL REPORT 2025 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2025 3. ACCOUNTING POLICIES (CONT’D.) 3.4 Material accounting policy information (cont’d.) (f) Financial instruments – initial recognition (cont’d.) (i) Initial recognition and subsequent measurement The classification of financial instruments at initial recognition depends on their contractual terms and the business model for managing the instruments, as described in Note 3.4(g)(i). Financial instruments are initially measured at their fair value (as defined in Note 3.4(j)), except in the case of financial assets and financial liabilities recorded at fair value through profit or loss (“FVTPL”), transaction costs are added to, or subtracted from this amount. Trade receivables are measured at the transaction price. When the fair value of financial instruments at initial recognition differs from the transaction price, the Group and the Bank account for the Day 1 profit or loss. (ii) Measurement categories of financial assets and liabilities The Group and the Bank classify all of their financial assets based on the business model for managing the assets and the asset’s contractual terms, measured at either: (a) Amortised Cost, as explained in Note 3.4(g)(i); (b) FVOCI, as explained in Notes 3.4(g)(v) and 3.4(g)(vi); or (c) FVTPL, as explained in Notes 3.4(g)(iv) and 3.4 (g)(viii). The Group and the Bank classify and measure their derivative and trading portfolio at FVTPL as explained in Notes 3.4(g)(ii) and 3.4(g)(iv). The Group and the Bank may designate financial instruments at FVTPL, if doing so eliminates or significantly reduces measurement or recognition inconsistencies, as explained in Note 3.4(g)(viii). Financial liabilities, other than loan commitments and financial guarantees, are measured at amortised cost or at FVTPL when they are held for trading and derivative instruments or the fair value designation is applied, as explained in Note 3.4(g)(viii). Financial liabilities are recognised in the statements of financial position when, and only when, the Group and the Bank become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. (g) Financial assets and liabilities (i) Financial assets at amortised cost The Group and the Bank measure financial assets at amortised cost if both of the following conditions are met: • The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest (“SPPI”) on the principal amount outstanding.
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