2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.) 2.3 Summary of significant accounting policies (cont’d.) (h) Financial assets Initial recognition and measurement Financial assets are classified and measured at amortised cost, FVOCI or fair value through profit or loss (“FVTPL”), as appropriate. A financial instrument is recognised in the statement of financial position when, and only when, the Group and the Corporation becomes a party to the contractual provisions of the instrument. With the exception of trade receivables that do not contain a significant financing component, the Group and the Corporation initially measure a financial asset at its fair value plus, in the case of a financial asset not at FVTPL, transaction costs. Trade receivables that do not contain a significant financing component is initially measured at the transaction price. The Group and the Corporation determine the classification of financial assets at initial recognition and are not reclassified subsequent to their initial recognition unless the Group and the Corporation change their business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. Amortised cost Amortised cost category comprises financial assets that are held within a business model whose objective is to hold assets to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Fair value through other comprehensive income This category comprises debt instruments where it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. FVOCI category also comprises investment in equity that is not held for trading (equity instruments), and the Group and the Corporation did not irrevocably elect to present subsequent changes in the investment’s FVOCI. This election is made on an investment-by-investment basis. Fair value through profit or loss All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes derivative financial assets (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument as per Note 2.3(j) and Note 2.3(n)). On initial recognition, the Group and the Corporation may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. 2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.) 2.3 Summary of significant accounting policies (cont’d.) (h) Financial assets (cont’d.) Subsequent measurement Amortised cost Subsequent to initial recognition, financial assets at amortised costs are measured using the effective interest rate (“EIR”) method and are subject to impairment. Gains and losses are recognised in income statement when the asset is derecognised, modified or impaired. Interest income and foreign exchange gains or losses are recognised in income statement. The Group’s and the Corporation’s financial assets at amortised cost include cash and bank balances, trade and other receivables, finance lease receivables and other non-current assets. Fair value through other comprehensive income Financial assets categorised as FVOCI are subsequently measured at fair value with unrealised gains and losses recognised directly in other comprehensive income and accumulated under FVOCI reserve in equity. For debt instruments, when the investment is derecognised or determined to be impaired, the cumulative gain or loss previously recorded in equity is reclassified to the income statement. For equity instruments, the gains or losses accumulated in other comprehensive income are never reclassified to income statement. The Group’s financial assets at FVOCI include derivative assets. Fair value through profit or loss Financial assets categorised as FVTPL are subsequently measured at their fair value with gains or losses recognised in the income statement. The Group’s and the Corporation’s financial assets at FVTPL include quoted and unquoted equity investments. All financial assets, except for those measured at FVTPL and equity investments measured at FVOCI, are subject to impairment as disclosed in Note 2.3(m). Derecognition A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Group’s consolidated statement of financial position) when: • the rights to receive cash flows from the asset have expired; or • the Group and the Corporation have transferred their rights to receive cash flows from the asset or have assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass through” arrangement and either: (a) the Group and the Corporation have transferred substantially all the risks and rewards of the asset; or (b) the Group and the Corporation have neither transferred nor retained substantially all the risks and rewards of the asset, but have transferred control of the asset. NOTES TO THE FINANCIAL STATEMENTS 31 December 2021 NOTES TO THE FINANCIAL STATEMENTS 31 December 2021 MISC Berhad 318 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 319 FINANCIAL STATEMENTS FINANCIAL STATEMENTS
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