Page 91 - HRC_AR2020

HENGYUAN REFINING COMPANY BERHAD I 89

2 sUMMarY of siGnificant accoUntinG policies (continued)
2.7 financial assets (continued)
(c) subsequent measurement – impairment (continued)
Significant increase in credit risk (continued)
The following indicators are incorporated:

• actual or expected significant adverse changes in business, financial or economic conditions that are expected
to cause a significant change to the debtor’s ability to meet its obligations;
• actual or expected significant changes in the operating results of the debtor; or
• significant changes in the expected performance and behaviour of the debtor, including changes in the
payment status of debtor in the Company and changes in the operating results of the debtor.
Definition of default and credit-impaired financial assets
The Company defines a financial instrument as default, which is fully aligned with the definition of credit-impaired,
when it meets one or more of the following criteria:
Quantitative criteria:
The Company defines a financial instrument as default, when the counterparty fails to make contractual
payment within 90 days of when they fall due.
Qualitative criteria:
The debtor meets unlikeliness to pay criteria, which indicates the debtor is in significant financial liability.
The Company considers the following instances:
• the debtor is in breach of financial covenants;
• concessions have been made by the lender relating to the debtor’s financial difficulty;
• it is becoming probable that the debtor will enter bankruptcy or other financial reorganisation; or
• the debtor is insolvent.
Write off

Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is
no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment
plan with the Company.

Impairment losses on trade receivables are presented as net impairment losses within operating profit.
Subsequent recoveries of amounts previously written off are credited against the same line.
The Company writes off financial assets, in whole or in part, when it has exhausted all practical recovery
efforts and has concluded there is no reasonable expectation of recovery. The assessment of no reasonable
expectation of recovery is based on unavailability of debtor’s sources of income or assets to generate sufficient
future cash flows to repay the amount. The Company may write off financial assets that are still subject to
enforcement activity. Subsequent recoveries of amounts previously written off will result in impairment gains.
(d) Derecognition
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired
or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.
On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum
of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive
income is recognised in profit or loss.