Press Metal Annual Report 2023

Financial Statements Financial Statements Press Metal Aluminium Holdings Berhad 278 279 Integrated Annual Report 2023 Notes to the Financial Statements Notes to the Financial Statements 28. FINANCIAL INSTRUMENTS (CONT’D) 28.4 Credit risk (cont’d) Trade receivables and contract assets (cont’d) Recognition and measurement of impairment loss (cont’d) The movements in the allowance for impairment in respect of non-related party trade receivables and contract assets during the year are shown below: Group Trade receivables credit impaired RM’000 Contract assets RM’000 Total RM’000 Balance at 1 January 2022 12,139 - 12,139 Amounts written off (1,591) - (1,591) Net remeasurement of loss allowance 273 - 273 Effect of movements in exchange rate (220) - (220) Balance at 31 December 2022/1 January 2023 10,601 - 10,601 Net remeasurement of loss allowance 7,407 - 7,407 Effect of movements in exchange rate (3,445) - (3,445) Balance at 31 December 2023 14,563 - 14,563 Increase in Group’s impairment loss allowance was mainly contributed by the increase in credit impaired balance in the contracting and fabrication business. As at 31 December 2023, all of the trade receivables written off are still subject to enforcement activity. Cash and cash equivalents The cash and cash equivalents are held with banks and financial institutions. As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position. These banks and financial institutions have low credit risks. In addition, some of the bank balances are insured by government agencies. Consequently, the Group and the Company are of the view that the loss allowance is not material and hence, it is not provided for. Investments and derivative financial instruments Risk management objectives, policies and processes for managing the risk Investments are allowed only in liquid securities. Transactions involving derivative financial instruments are with approved financial institutions. Exposure to credit risk, credit quality and collateral As at the end of the reporting period, the Group has only invested in domestic securities. The derivative contracts were entered into with approved financial institutions. The maximum exposure to credit risk is represented by the carrying amounts in the statement of financial position. In view of the sound credit rating of counterparties, management does not expect any counterparty to fail to meet its obligations. The Group is of the view that the loss allowance is not material and hence, it is not provided for. The investments are unsecured. 28. FINANCIAL INSTRUMENTS (CONT’D) 28.4 Credit risk (cont’d) Financial guarantees Risk management objectives, policies and processes for managing the risk The Company provides unsecured financial guarantees to banks in respect of banking facilities and credit terms granted to certain subsidiaries. The Company monitors the ability of the subsidiaries to fulfil the contracts and service their repayments on an individual basis. Exposure to credit risk, credit quality and collateral The maximum exposure to credit risk of the Company amounts to RM712,039,000 (2022: RM1,272,723,000) as at the end of the reporting period. Recognition and measurement of impairment loss The Company assumes that there is a significant increase in credit risk when a subsidiary’s financial position deteriorates significantly. The Company considers a financial guarantee to be credit impaired when: • The subsidiary is unlikely to repay its credit obligation to the bank in full; or • The subsidiary is unlikely to repay its amounts owing to the supplier in full; or • The subsidiary is continuously loss making and is having a deficit shareholders’ fund. The Company determines the probability of default of the guaranteed loans individually using internal information available. As at the end of the reporting period, there was no indication that any subsidiary would default on repayment. The financial guarantees have not been recognised since the fair value on initial recognition was not material. Inter-company receivables and loans and advances Risk management objectives, policies and processes for managing the risk The Group trades with an associate and provides unsecured advances to an associate. The Company provides unsecured loans and advances to subsidiaries. The Group and the Company monitor the ability of the subsidiaries and associates to repay the loans and advances on an individual basis.

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