TO THE FINANCIAL STATEMENTS 2021 (CONT’D)
30. FINANCIAL INSTRUMENTS (CONT’D) Risk management objectives and policies (cont’d)
30. FINANCIAL INSTRUMENTS (CONT’D)
Risk management objectives and policies (cont’d) (b) Credit risk (cont’d)
(iii) Cash and bank balances
The credit risk for cash and bank balances are considered negligible, since the counterparties are reputable banks with high quality external credit ratings.
(iv) Intercompany loans and advances
The maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position.
The Group and the Company provide unsecured loans and advances to subsidiaries and affiliated companies and monitors the results of the subsidiaries and affiliated companies regularly.
Generally, the Company considers loans and advances to subsidiaries and affiliated companies to have low credit risk. The Company assumes that there is a significant increase in credit risk when a subsidiary’s financial position deteriorates significantly. As the Company is able to determine the timing of payment of the intercompany loans and advances, the Company considers a related party’s loan or advances to be credit-impaired when the subsidiary is unable to repay its loan or advance to the Company in full, either through a fire sale of assets or from future cash flows from its operations.
Details of the measurement of ECL is shown below:
Category Description Basis for recognising expected credit losses (“ECL”)
Performing Related parties have a low risk of default and a strong capacity to meet contractual cash flows.
12-month ECL
Doubtful Related parties for which there is significant credit risk due to actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause significant change in the counterparty’s ability to meet its obligations.
Lifetime ECL – not credit- impaired
In default Related parties for where there are evidence indicating the loans and advances are credit impaired.
Lifetime ECL – credit-impaired
30. FINANCIAL INSTRUMENTS (CONT’D)
Risk management objectives and policies (cont’d) (b) Credit risk (cont’d)
(iv) Intercompany loans and advances (cont’d)
The following table provides information about the exposure to credit risk and ECL for subsidiaries’ and affiliated companies’ loans:
Amount owing from subsidiaries
Gross carrying amount
Impairment loss
allowance Net balance
RM RM RM
Company
2021
Low credit risk 24,387,313 (150,000) 24,237,313
Credit impaired 7,953,947 (7,953,947) -
32,341,260 (8,103,947) 24,237,313 2020
Low credit risk 4,916,220 (150,000) 4,766,220
Credit impaired 6,616,972 (6,616,972) -
11,533,192 (6,766,972) 4,766,220 Amount owing from affiliated companies
Gross carrying amount
Impairment loss
allowance Net balance
RM RM RM
Group
2021
Low credit risk 2,009,086 - 2,009,086
Credit impaired 1,063,504 (1,063,504) -
3,072,590 (1,063,504) 2,009,086
2020
Low credit risk 2,664,295 - 2,664,295
Credit impaired 889,654 (889,654) -
3,553,949 (889,654) 2,664,295
Risk management objectives and policies (cont’d) (b) Credit risk (cont’d)
(iv) Intercompany loans and advances (cont’d)
The following table provides information about the exposure to credit risk and ECL for subsidiaries’ and affiliated companies’ loans (cont’d):
Amount owing from affiliated companies Gross carrying
amount
Impairment loss
allowance Net balance
RM RM RM
Company
2021
Low credit risk - - -
Credit impaired 170,383 (170,383) -
170,383 (170,383) -
2020
Low credit risk 651,742 - 651,742
Credit impaired - - -
651,742 - 651,742
(v) Other investments
At the end of the reporting period, the Group and the Company have investments in domestic securities. The maximum exposure to credit risk is represented by the carrying amounts in the statement of financial position.
Financial guarantee
The Company has provided corporate guarantee of RM61,887,642 (2020:
RM63,298,206) for banking facilities granted by licensed banks and a licensed financial institution to the subsidiaries, represents the maximum exposure to credit risk of the Company. The Company monitors on an ongoing basis the results of the subsidiary companies and repayments made by the subsidiary companies.
Financial guarantees have not been recognised since the fair value on initial recognition was not material.
As at the end of the reporting period, there was no indication that the subsidiary companies would default in payment.
30. FINANCIAL INSTRUMENTS (CONT’D)
Risk management objectives and policies (cont’d) (c) Liquidity risk
Liquidity risk is the risk arising from the Group and the Company not being able to meet their financial obligations due to shortage of funds.
In managing their exposures to liquidity risk, the Group and the Company maintain a level of cash and cash equivalents and bank credit facilities deemed adequate by the management to ensure that they will have sufficient liquidity to meet their liabilities as and when they fall due.
The following table shows the areas where the Group and the Company are exposed to liquidity risk:-
Group
Current Non-current
Less than
1 year Between
1 to 5 years More than 5 years
RM RM RM
2021
Non-derivative financial liabilities
Trade payables 19,310,580 - -
Other payables 21,183,412 - -
Amount owing to affiliated companies 879,685 - -
Loans and borrowings 38,099,503 18,419,727 11,763,072
Lease liabilities 1,504,412 5,167,573 51,231,061
Total undiscounted financial liabilities 80,977,592 23,587,300 62,994,133
Financial guarantee* 61,887,642 - -
Risk management objectives and policies (cont’d) (c) Liquidity risk (cont’d)
Group
Current Non-current
Less than
1 year Between
1 to 5 years More than 5 years
RM RM RM
2020
Non-derivative financial liabilities
Trade payables 23,052,712 - -
Other payables 34,583,038 - -
Amount owing to affiliated companies 1,572,478 - -
Loans and borrowings 31,879,347 30,698,983 14,409,396
Lease liabilities 2,210,593 6,659,492 66,481,720
Total undiscounted financial liabilities 93,298,168 37,358,475 80,891,116
Financial guarantee* 63,298,206 - -
Company
Current Non-current
Less than
1 year Between
1 to 5 years More than 5 years
RM RM RM
2021
Non-derivative financial liabilities
Trade payables 950,719 - -
Other payables 7,908,341 - -
Amount owing to subsidiaries 14,926,111 - -
Amount owing to affiliated companies 879,008 - -
Lease liabilities 318,876 844,381 -
Loans and borrowings 9,887,320 14,439,763 11,763,072
Total undiscounted financial liabilities 34,870,375 15,284,144 11,763,072 2020
Non-derivative financial liabilities
Trade payables 4,016,906 - -
Other payables 14,576,156 - -
Amount owing to subsidiaries 15,238,545 - -
Amount owing to affiliated companies 1,306,846 - -
Lease liabilities 318,876 1,163,244 -
Loans and borrowings 8,006,445 17,892,455 13,822,772
Total undiscounted financial liabilities 43,463,774 19,055,699 13,822,772
* This exposure is included in liquidity risk for illustration only. No financial guarantee was called upon by the holders as at the end of the reporting period.