Notes to the Financial Statements for the Financial Year Ended 30 September 2024 MKH BERHAD ANNUAL REPORT 2024 Laying The Foundation of Excellence Where People Matter Guided by Leadership, Inspired by People Delivering Value That Matters to People PG. 198 3. MATERIAL ACCOUNTING POLICY INFORMATION (CONT’D) (u) Financial instruments (Cont’d) (i) Financial assets (Cont’d) Impairment of financial assets and contract assets An impairment loss is recognised in profit or loss based on expected credit losses (“ECL”) at the end of each reporting period. The Group and the Company apply the simplified approach to measure the impairment of trade receivables, contract assets and loan receivables at lifetime ECL. The ECL are estimated based on the Group’s and the Company’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the end of the reporting period, including time value of money where appropriate. To measure the ECL, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to unbilled work in progress and have substantially the same risk characteristics as the trade receivables. The Group and the Company have therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets. For other financial assets such as loan receivables, other receivables and amount due from intercompany, the Group and the Company recognise lifetime ECL when there has been a significant increase in credit risk since initial recognition. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Group and the Company consider reasonable and supportable information that is relevant and available without due cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and includes forward looking information. Derecognition of financial assets The Group and the Company derecognise a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
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