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88 I 2020 ANNUAL REPORT I financial reports

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020 (CONTINuED)

2 sUMMarY of siGnificant accoUntinG policies (continued)
2.7 financial assets (continued)
(b) recognition and measurement (continued)

Debt instruments (continued)
(iii) fair value through profit or loss (‘fVtpl’)
Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVTPL. The Company may
also irrevocably designate financial assets at FVTPL if doing so significantly reduces or eliminates a mismatch
created by assets and liabilities being measured on different bases. Fair value changes are recognised in
profit or loss within other operating gains/losses.
(c) subsequent measurement – impairment

Impairment for debt instruments
The Company assesses on a forward looking basis the expected credit losses (“ECL”) associated with its debt
instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether
there has been a significant increase in credit risk.
The Company’s financial instruments that are subject to ECL model are trade receivables and other receivables.
While cash and cash equivalents are also subject to impairment requirements of MFRS 9, the identified
impairment loss was immaterial.
ECL represent a probability-weighted estimate of the difference between present value of cash flows according
to contract and present value of cash flows the Company expects to receive, over the remaining life of the
financial instrument.
The measurement of ECL reflects:

• an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
• the time value of money; and
• reasonable and supportable information that is available without undue cost or effort at the reporting date
about past events, current conditions and forecasts of future economic conditions.
For trade receivables, the Company applies the simplified approach permitted by MFRS 9, which requires
expected lifetime losses to be recognised from initial recognition of the receivables. Therefore, the Company
does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each
reporting date.
For other receivables, the Company measures ECL through loss allowance at an amount equal to 12-month ECL
if credit risk on a financial instrument or a group of financial instruments has not increased significantly since
initial recognition. For those credit exposures for which there has been a significant increase in credit risk since
initial recognition, a loss allowance is required for credit losses expected over the remaining useful life of the
exposure, irrespective of the timing of default (a lifetime ECL).
Significant increase in credit risk
The Company considers the probability of default upon initial recognition of asset and whether there has been a
significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there
is a significant increase in credit risk, the Company compares the risk of a default occurring on the asset as at the
reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and
supportable forward-looking information.