MKH Annual Report 2018

118 MKH Berhad Annual Report 2018 3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) (s) Financial instruments (Cont’d) (ii) Financial instrument categories and subsequent measurement Financial assets Financial assets are classified into the following specified categories: financial assets “at fair value through profit or loss” (FVTPL), “held-to-maturity” investments, “available-for-sale” (AFS) financial assets and “loans and receivables”. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable, or an equity instrument of another enterprise. (a) Financial assets at FVTPL Financial assets are classified as at FVTPL when the financial assets are either held for trading or is designated as at FVTPL. Financial assets at FVTPL are stated at fair value with any gains or losses arising on remeasurement recognised in profit or loss. (b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market (including fixed deposits with financial institutions). Loans and receivables are measured at amortised cost using the e ective interest method, less any impairment. Interest income is recognised by applying the e ective interest rate, except for short-term receivables when the recognition of interest would be immaterial. The e ective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The e ective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the e ective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or (where appropriate) a shorter period, to the net carrying amount on initial recognition. Income from financial assets is recognised on an e ective interest method for debt instruments other than those financial assets classified as at FVTPL. Equity instruments (a) Classification as debt or equity Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement. (b) Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs. FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2018 NOTES TO THE FINANCIAL STATEMENTS