The Audit Committee was established on 15 January 2000 by the Board of Directors to assist the Board in its
C) INTERNAL AUDIT
31. Financial instruments (continued) 4 Credit risk (continued)
Trade receivables (continued)
Recognition and measurement of impairment loss (continued)
Loss rates are based on actual credit loss experience over the past three years. The Group also considers differences between (a) economic conditions during the period over which the historic data has been collected, (b) current conditions and (c) the Group’s view of economic conditions over the expected lives of the receivables. Nevertheless, the Group believes that these factors are immaterial for the purpose of impairment calculation for the year.
The following table provides information about the exposure to credit risk and ECLs for trade receivables which are grouped together as they are expected to have similar risk nature.
Gross carrying amount RM’000
Loss allowance
RM’000
balanceNet RM’000 Group
2020
Current (not past due) 240,287 (1,798) 238,489
1-30 days past due 75,548 (428) 75,120
31-60 days past due 19,126 (253) 18,873
61-90 days past due 7,433 (269) 7,164
91-120 days past due 2,607 (270) 2,337
More than 120 days past due 15,169 (2,809) 12,360
360,170 (5,827) 354,343 Credit impaired
Individually impaired 18,963 (15,156) 3,807
379,133 (20,983) 358,150 2019
Current (not past due) 198,760 (724) 198,036
1-30 days past due 71,173 (429) 70,744
31-60 days past due 15,691 (388) 15,303
61-90 days past due 3,128 (93) 3,035
91-120 days past due 9,267 (239) 9,028
More than 120 days past due 10,572 (3,837) 6,735
308,591 (5,710) 302,881 Credit impaired
Individually impaired 22,750 (16,703) 6,047
331,341 (22,413) 308,928
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31.4 Credit risk (continued) Trade receivables (continued)
Recognition and measurement of impairment loss (continued)
There are trade receivables where the Group has not recognised any loss allowance as the trade receivables are supported by collateral such as assets held as securities and other credit enhancement in managing exposure to credit risk.
The movements in the allowance for impairment in respect of receivables net of advances to suppliers during the year are shown below.
Lifetime RM’000ECL
Credit impaired
RM’000 Total RM’000 Group
Balance at 1 April 2018 5,865 14,471 20,336
Amounts written off (19) (3,680) (3,699)
Net remeasurement of loss allowance (136) 5,912 5,776
Balance at 31 March/1 April 2019 5,710 16,703 22,413
Amounts written off — (4,599) (4,599)
Net remeasurement of loss allowance 117 3,052 3,169
Balance at 31 March 2020 5,827 15,156 20,983
Cash and cash equivalents
The cash and cash equivalents are held with banks and financial institutions. As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statements of financial position.
These banks and financial institutions have low credit risks. In addition, some of the bank balances are insured by government agencies. Consequently, the Group and the Company are of the view that the loss allowance is not material and hence, it is not provided for.
Other receivables
Credit risks on other receivables are mainly arising from deposits paid for office buildings and convenience stores. These deposits will be received at the end of each lease terms. The Group manages the credit risk together with the leasing arrangement.
As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position.
As at the end of the reporting period, the Group did not recognise any allowance for impairment losses.
Annual Report | 2020
31. Financial instruments (continued) 31.4 Credit risk (continued)
Financial guarantees
Risk management objectives, policies and processes for managing the risk
The Company provides unsecured financial guarantees to banks in respect of banking facilities granted to certain subsidiaries. The Company monitors the ability of the subsidiaries to service their loans on an individual basis.
Exposure to credit risk, credit quality and collateral
The maximum exposure to credit risk amounts to RM498,038,000 (2019: RM429,749,000) representing the outstanding banking facilities of the subsidiaries as at the end of the reporting period.
The financial guarantees are provided as credit enhancements to the subsidiaries’ secured loans.
Recognition and measurement of impairment loss
The Company assumes that there is a significant increase in credit risk when a subsidiary’s financial position deteriorates significantly. The Company considers a financial guarantee to be credit impaired when:
• The subsidiary is unlikely to repay its credit obligation to the financial institution in full; or
• The subsidiary is continuously loss making and is having a deficit shareholders’ fund.
The Company determines the probability of default of the guaranteed loans individually using internal information available.
As at the end of the reporting period, there was no indication that any subsidiary would default on repayment and hence no allowance for impairment losses was recognised by the Company.
Intercompany loans and advances
Risk management objectives, policies and processes for managing the risk
The Company provides unsecured loans and advances to subsidiaries. The Company monitors the ability of the subsidiaries to repay the loans and advances on an individual basis.
Exposure to credit risk, credit quality and collateral
As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position.
Loans and advances provided are not secured by any collateral or supported by any other credit enhancements.
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31.4 Credit risk (continued)
Intercompany loans and advances (continued) Recognition and measurement of impairment loss
Generally, the Company considers loans and advances to subsidiaries 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 payments of the subsidiaries’ loans and advances when they are payable, the Company considers the loans and advances to be in default when the subsidiaries are not able to pay when demanded. The Company considers a subsidiary’s loan or advance to be credit impaired when:
• The subsidiary is unlikely to repay its loan or advance to the Company in full; or
• The subsidiary is continuously loss making and is having a deficit shareholders’ fund.
The Company determines the probability of default for these loans and advances individually using internal information available.
At the end of the reporting period, there was no indication that the financial positions of the subsidiaries had deteriorated significantly. There was no subsidiary which is unlikely to repay its loan or advances to the Company in full and in deficit shareholders’ fund.
31.5 Liquidity risk
Liquidity risk is the risk that the Group and the Company will not be able to meet its financial obligations as they fall due. The Group’s and the Company’s exposure to liquidity risk arises principally from its various payables, loans and borrowings. The Group also manage its liquidity risk by entering into supplier factoring facilities when necessary.
The Group and the Company maintain a level of cash and cash equivalents and bank facilities deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due. The Company can also demand repayment of advances/dividends from subsidiaries to meet its ability as and when they fall due.
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.
Annual Report | 2020
31. Financial instruments (continued) 31.5 Liquidity risk (continued) Maturity analysis The table below summarises the maturity profile of the Group’s and the Company’s financial liabilities as at the end of the reporting period based on undiscounted contractual payments: Carrying amount RM’000
Contractual interest/ profit rate/ discount rate %
Contractual cash flows RM’000
Under 1 year RM’000
1 – 2 years RM’000
2 – 5 years RM’000
More than 5 years RM’000 Group 2020 Non-derivative financial liabilities Revolving credit85,6052.43 - 5.5687,93487,934——— Lease liabilities148,2782.80 - 4.92360,406133,10094,93565,18367,188 Bank overdrafts46,6507.40 - 9.8546,82346,823——— Bills payable320,3741.47 - 6.96322,601322,601——— Term loans852,9561.29 - 7.42900,118208,401245,065446,652— Hire purchase liabilities2582.00 - 3.95281141140—— Trade and other payables368,114—368,114368,114——— 1,822,2352,086,2771,167,114340,140511,83567,188 Derivative financial liabilities Forward exchange contracts (gross settled): Outflow2,819—128,276128,276——— Inflow——(125,457)(125,457)——— Commodity future contracts(365)—(365)(365)——— Cross currency swap(4,547)—(4,547)(4,547)——— Interest rate swap4,998—5,040——5,040— 1,825,1402,089,2241,165,021340,140516,87567,188 A Milestone on Our Sus Growth Journey
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