Total Dissolved Solid (ppm) by Month (FYE 2022)
26. FINANCIAL INSTRUMENTS (CONT’D) (b) Financial risk management (cont’d)
(i) Credit risk (cont’d)
Credit risk concentration profile (cont’d)
The information about the credit risk exposure on the Group’s and the Company’s trade receivables using the provision matrix are as follows:
Gross
Expected carrying
credit loss amount at Impairment rate default losses
RM RM RM
2022
Trade receivables
Current 0% 13,672,977 –
Past due:
1 to 30 days past due 0% 124,513 –
31 to 60 days past due 0% 124,513 –
61 to 90 days past due 0% 124,527 –
more than 90 days past due 0% 17,741 –
14,064,271 –
Impaired - individually 22,374,068 22,374,068
36,438,339 22,374,068 2021
Trade receivables
Current 0% 9,014,255 –
Impaired - individually 21,408,745 21,408,745
30,423,000 21,408,745 Other receivables and other financial assets
For other receivables and other financial assets (including cash and bank balances), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.
At the reporting date, the Group’s and the Company’s maximum exposure to credit risk arising from other receivables and other financial assets is represented by the carrying amount of each class of financial assets recognised in the statements of financial position.
The Group and the Company consider 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 Group and the Company compare 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 supportive forward-looking information. Especially the following indicators are incorporated:
• internal credit rating
• actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the borrower's ability to meet its obligations
26. FINANCIAL INSTRUMENTS (CONT’D) (b) Financial risk management (cont’d)
(i) Credit risk (cont’d)
Other receivables and other financial assets (cont’d)
Regardless of the analysis above, a significant increase in credit risk is presumed if a debtor is more than 30 days past due in making a contractual payment.
Some intercompany loans between entities within the Group are repayable on demand. For loans that are repayable on demand, impairment losses are assessed based on the assumption that repayment of the loan is demanded at the reporting date. If the borrower does not have sufficient highly liquid resources when the loan is demanded, the Group and the Company will consider the expected manner of recovery and recovery period of the intercompany loan.
Other than credit-impaired other receivables, the Group and the Company consider these financial assets to be of low credit risk, for which no material loss allowance is required. Refer to Note 3.12(a) to the financial statements for the Group’s and the Company’s other accounting policies for impairment of financial assets.
Financial guarantee contracts
The Company is exposed to credit risk in relation to financial guarantees given to banks in respect of banking facilities granted to certain subsidiaries. The Company monitors the results of the subsidiaries and their repayment on an on-going basis. The maximum exposure to credit risks is representing by the maximum amount the Company could pay if the guarantee is called on as disclosed in Note 29. As at the reporting date, there was no loss allowance for impairment as determined by the Company for the financial guarantee.
The financial guarantees have not been recognised since the fair value on initial recognition was not material as the guarantee is provided as credit enhancement to subsidiaries’ secured borrowings.
(ii) Liquidity risk
Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations when they fall due. The Group's and the Company’s exposure to liquidity risk arise primarily from mismatches of the maturities between financial assets and liabilities. The Group’s and the Company’s exposure to liquidity risk arise principally from trade and other payables and loans and borrowings.
The Group and the Company maintain a level of cash and cash equivalents deemed adequate by management to ensure, as far as possible, that it will have sufficient liquidity to meets its liabilities when they fall due.
26. FINANCIAL INSTRUMENTS (CONT’D) (b) Financial risk management (cont’d)
(ii) Liquidity risk (cont’d) Maturity analysis
The maturity analysis of the Group’s and the Company's financial liabilities by their relevant maturity at the reporting date are based on contractual undiscounted repayment obligations are as follows:
<--- Contractual undiscounted cash flow --->
On demand Between More Carrying or within 1 and 5 than
Group amount 1 year years 5 years Total
2022 RM RM RM RM RM
Financial liabilities Trade payables and other
payables 23,922,025 23,922,025 – – 23,922,025
Lease liabilities 17,024,011 8,000,560 10,046,818 1,290,000 19,337,378 40,946,036 31,922,585 10,046,818 1,290,000 43,259,403 Company
Financial liabilities
Other payables 4,542,363 4,542,363 – – 4,542,363 Financial
guarantee
contracts – 14,573,411 – – 14,573,411
4,542,363 19,115,774 – – 19,115,774
<--- Contractual undiscounted cash flow --->
On demand Between More Carrying or within 1 and 5 than
Group amount 1 year years 5 years Total
2021 RM RM RM RM RM
Financial liabilities Trade payables and other
payables 20,900,598 20,900,598 – – 20,900,598
Bank overdrafts 2,734,894 2,734,894 – – 2,734,894 Lease liabilities 18,712,372 6,921,595 13,202,992 1,350,000 21,474,587 42,347,864 30,557,087 13,202,992 1,350,000 45,110,079 Company
Financial liabilities
Other payables 4,851,599 4,851,599 – – 4,851,599
Financial guarantee
contracts – 18,625,412 – – 18,625,412
4,851,599 23,477,011 – – 23,477,011
26. FINANCIAL INSTRUMENTS (CONT’D) (b) Financial risk management (cont’d)
(iii) Foreign currency risk
Foreign currency risk is the risk of fluctuation in fair value or future cash flows of a financial instrument as a result of changes in foreign exchange rates.
The Group has exposed to foreign currency risk on transactions and balances that are denominated in currencies other than the functional currency of the Group, primarily RM. The foreign currency giving rise to this risk is primarily Renminbi (“RMB”), Hong Kong Dollar (“HKD”), and United States Dollar (“USD”).
Foreign currency risk is monitored closely on an ongoing basis to ensure that the net exposure is at acceptable level.
The Group’s unhedged financial assets and liabilities that are not denominated in their functional currencies are as follows:
United
Hong Kong States
Renminbi Dollar Dollar Total
Group RM RM RM RM
2022
Financial assets
Trade and other receivables 21,286,271 – – 21,286,271 Financial liabilities
Trade and other payables (429,829) (2,464) (190,355) (622,648) Net financial assets/
(liabilities) held in non-
functional currencies 20,856,442 (2,464) (190,355) 20,663,623 2021
Financial assets
Trade and other receivables 20,315,352 – – 20,315,352
Cash and bank balances – 2,124 – 2,124
20,315,352 2,124 – 20,317,476
Financial liabilities
Trade and other payables (410,223) (2,464) (472,044) (884,731) Net financial assets/
(liabilities) held in non-
functional currencies 19,905,129 (340) (472,044) 19,432,745
26. FINANCIAL INSTRUMENTS (CONT’D) (b) Financial risk management (cont’d)
(iii) Foreign currency risk (cont’d)
Sensitivity analysis for foreign currency risk
The Group’s principal foreign currency exposure relates mainly to Renminbi (“RMB”), Hong Kong Dollar (“HKD”) and United States Dollar (‘USD’).
The following table demonstrates the sensitivity to a reasonably possible change in the RMB, HKD and USD, with all other variables held constant on the Group’s total equity and loss for the financial year.
Effect on
Change loss for the
in rate financial Effect % year on equity
Group RM RM
2022
- Renminbi + 5% 792,545 792,545
- 5% (792,545) (792,545)
- Hong Kong Dollar + 5% (94) (94)
- 5% 94 94
- United States Dollar + 5% (7,233) (7,233)
- 5% 7,233 7,233
2021
- Renminbi + 5% 756,395 756,395
- 5% (756,395) (756,395)
- Hong Kong Dollar + 5% (13) (13)
- 5% 13 13
- United States Dollar + 5% (17,938) (17,938)
- 5% 17,938 17,938 (iv) Interest rate risk
Interest rate risk is the risk of fluctuation in fair value or future cash flows of the Company’s financial statements as a result of changes in market interest rates. The Company’s exposure to interest rate risk arises primarily from its long-term loans and borrowings with floating interest rates.
Sensitivity analysis for interest rate risk
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant on the Group’s total equity and loss for the financial year.
Effect on
Change loss for the
in basis financial Effect point year on equity
RM RM RM
Group
2021 +25 5,196 5,196
-25 (5,196) (5,196)
26. FINANCIAL INSTRUMENTS (CONT’D)