My EG Services Berhad Annual Report 2019

MY E.G. SERVICES BERHAD [Registration No. 200001003034 (505639-K)] 116 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2019 (CONT’D) 5. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 5.1 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (cont’d) Key Sources of Estimation Uncertainty (cont’d) (e) Impairment of Non-Trade Receivables The loss allowances for non-trade financial assets are based on assumptions about risk of default and expected loss rates. The Group uses judgement in making these assumptions and selecting appropriate inputs to the impairment calculation, based on the past payment trends, existing market conditions as well as forward-looking estimates at the end of each reporting period. The carrying amounts of other receivables, amounts owing by subsidiaries, amounts owing by joint ventures and amounts owing by an associate as at the reporting date are disclosed in Notes 19 ,20, 21 and 22 to the financial statements. (f) Fair Value Estimates for Unquoted Financial Assets The Group carries certain financial assets that are not traded in an active market at fair value. The Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. The amount of fair value changes would differ if the Group uses different valuation methodologies and assumptions, and eventually affect profit and/or other comprehensive income. The carrying amounts of these financial assets as at the reporting date are disclosed in Note 12 to the financial statements. Critical Judgements Made in Applying Accounting Policies Management believes that there are no instances of application of critical judgement in applying the Group’s accounting policies which will have a significant effect on the amounts recognised in the financial statements other than as disclosed below:- (a) Lease Terms Some leases contain extension options exercisable by the Group before the end of the non- cancellable contract period. In determining the lease term, management considers all facts and circumstances including the past practice and any cost that will be incurred to change the asset if an option to extend is not taken. An extension option is only included in the lease term if the lease is reasonably certain to be extended (or not terminated). In determining the incremental borrowing rate of the respective leases. The Group first determines the closest available borrowing rates before using significant judgement to determine the adjustments required to reflect the term, security, value or economic environment of the respective leases. (b) Classification between Investment Properties and Owner-occupied Properties Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold separately (or leased out separately under a finance lease), the Group accounts for the portions separately. If the portions could not be sold separately, the property is investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as investment property.