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Axiata Group Berhad | Annual Report 2016
FINANCIAL STATEMENTS
140
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f) Financial assets (continued)
(iv) Subsequent measurement – Impairment of financial assets
(a) Assets carried at amortised cost
The Group and the Company assess at the end of the reporting period whether there is objective evidence that a financial asset or
group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred
only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of
the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or
group of financial assets that can be reliably estimated.
The criteria that the Group and the Company use to determine that there is objective evidence of an impairment loss include:
•
Significant financial difficulty of the issuer or obligor;
•
A breach of contract, such as a default or delinquency in interest or principal payments;
•
The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession
that the lender would not otherwise consider;
•
It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
•
Disappearance of an active market for that financial asset because of financial difficulties; or
•
Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of
financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the
individual financial assets in the portfolio, including:
(i)
adverse changes in the payment status of borrowers in the portfolio; and
(ii) national or local economic conditions that correlate with defaults on the assets in the portfolio.
The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated
future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective
interest rate. The asset’s carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If ‘loans
and receivables’ or a ‘HTM investment’ has a variable interest rate, the discount rate for measuring any impairment loss is the
current effective interest rate determined under the contract. As a practical expedient, the Group and the Company may measure
impairment on the basis of an instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the
previously recognised impairment loss is recognised in profit or loss.
When an asset is uncollectible, it is written off against the related accumulated impairment losses account. Such assets are written
off after all the necessary procedures have been completed and the amount of the loss has been determined.
(b) Assets classified as AFS
The Group and the Company assess at the end of the reporting period whether there is objective evidence that a financial asset
or a group of financial assets is impaired.
For debt securities, the Group and the Company uses criteria and measurement of impairment loss applicable for ‘assets carried
at amortised cost’ above. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases
and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the
impairment loss is reversed through the profit or loss.
In the case of equity securities classified as AFS, in addition to the criteria for ‘assets carried at amortised cost’ above, a significant
or prolonged decline in the fair value of the security below its cost is also considered as an indicator that the assets are impaired. If
any such evidence exists for AFS financial assets, the cumulative loss that had been recognised directly in equity is removed from
equity and recognised in profit or loss. The amount of cumulative loss that is reclassified to profit or loss is the difference between
the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or
loss. Impairment losses recognised in profit or loss on equity instruments classified as AFS are not reversed through profit or loss
in subsequent period.