My EG Services Berhad Annual Report 2019

MY E.G. SERVICES BERHAD [Registration No. 200001003034 (505639-K)] 188 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2019 (CONT’D) 51. FINANCIAL INSTRUMENTS (CONT’D) 51.1 FINANCIAL RISK MANAGEMENT POLICIES (cont’d) (b) Credit Risk (cont’d) (iii) Assessment of Impairment Losses (cont’d) Amount Owing By An Associate and Amount Owing By Joint Ventures (Non-trade Balances) The Group applies the 3-stage general approach to measuring expected credit losses for amount owing by associates and joint ventures. No expected credit loss is recognised on these balances as it is negligible. Fixed Deposits with Licensed Banks, Cash and Bank Balances The Group considers these banks and financial institutions to have low credit risks. In addition, some of the bank balances are insured by Government agencies. Therefore, the Group is of the view that the loss allowance is immaterial and hence, it is not provided for. Amount Owing By Subsidiaries (Non-trade Balances) The Company applies the 3-stage general approach to measuring expected credit losses for all inter-company balances. Generally, the Company considers loans and advances to subsidiaries have low credit risks. The Company assumes that there is a significant increase in credit risk when a subsidiary’s financial position deteriorates significantly. As the Company is able to determine the timing of payments of the subsidiaries’ loans and advances when they are payable, the Company considers the loans and advances to be in default when the subsidiaries are not able to pay when demanded. The Company considers a subsidiary’s loan or advance to be credit impaired when the subsidiary is unlikely to repay its loan or advance in full or the subsidiary is continuously loss making or the subsidiary is having a deficit in its total equity. The Company determines the probability of default for these loans and advances individually using internal information available. Financial Guarantee Contracts All of the financial guarantee contracts are considered to be performing, have low risks of default and historically there were no instances where these financial guarantee contracts were called upon by the parties of which the financial guarantee contracts were issued to. Accordingly, no loss allowances were identified based on 12-month expected credit losses. (c) Liquidity Risk Liquidity risk arises mainly from general funding and business activities. The Group practises prudent risk management by maintaining sufficient cash balances and the availability of funding through certain committed credit facilities.