MKH Annual Report 2018

100 MKH Berhad Annual Report 2018 2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (Cont’d) (a) Statement of compliance (Cont’d) (iii) Malaysian Financial Reporting Standards (Cont’d) MFRS 9 Financial Instruments (Cont’d) Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are measured at FVTOCI. All other debt investments and equity investments are measured at fair values at the end of subsequent accounting periods. In addition, under MFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of equity instruments (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss. With regard to the measurement of financial liabilities designated as fair value through profit or loss, MFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the e ect of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Under MFRS 139, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss is presented in profit or loss. In relation to the impairment of financial assets, MFRS 9 requires an expected credit loss model, as opposed to an incurred loss model under MFRS 139. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at end of each reporting period to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised. The directors have preliminary assessment of the e ect of MFRS 9 adoption as follows: Existing New 2018 classification classification Financial assets RM under MFRS 139 under MFRS 9 The Group Receivables and deposits 260,950,140 Loans and receivables (“L&R”) AC Cash, bank balances, term deposits and fixed income funds 227,726,216 L&R AC The Company Receivables and deposits 362,465,541 L&R AC Cash, bank balances, term deposits and fixed income funds 3,941,479 L&R AC The Group and the Company expect to apply the simplified approach and record lifetime expected losses on all receivables. Apart from the impact arising from the expected credit loss model on impairment and providing more extensive disclosures on the Group’s and the Company’s financial instruments, the directors do not anticipate that the application of MFRS 9 will have a significant impact on the financial position and/or financial performance of the Group and of the Company. FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2018 NOTES TO THE FINANCIAL STATEMENTS