2018 UEM Edgenta Annual Report

2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.2 First time adoption of Malaysian Financial Reporting Standards (“MFRS”) (cont’d.) MFRS 9 Financial instruments MFRS 9 introduces new requirements with impacts mainly relating to classification and measurement of financial instruments, impairment assessment based on the expected credit loss model and hedge accounting. Classification and measurement MFRS 9 establishes three primary measurement categories for financial assets: Amortised cost, Fair Value Through Profit or Loss (“FVTPL”) and Fair Value Through Other Comprehensive Income (“FVOCI”). The basis of classification depends on the entity’s business model for managing the assets and the contractual cash flow characteristics of the financial asset. Financial assets will be measured at amortised cost if the assets are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows which represent solely payments of principal and interest. Financial assets will be measured at FVOCI if the assets are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual cash flows represent solely payments of principal and interest. Financial assets which are neither held at amortised cost nor at FVOCI will be measured at FVTPL. Investments in equity instruments are always measured at FVTPL with an irrevocable option at inception to present changes in FVOCI (provided the instrument is not held for trading). A debt instrument such as loans, advances and financing and investment securities are measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For financial liabilities, the standard is similar to most of the FRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than profit or loss, unless this creates an accounting mismatch. The classification and measurement requirements of MFRS 9 did not have a significant impact on the Group. The Group continued measuring at fair value all financial assets previously held at fair value under FRS 139. The following are the changes in the classification of the Group’s financial assets: (i) Trade receivables, concession, other receivables and cash, bank balances and deposits previously classified as Loans and receivables are held to collect contractual cash flows and give rise to cash flows representing solely payments of principal and interest. These are now classified and measured as Debt instruments at amortised cost. (ii) The Group elected to classify short term investments as Financial assets at fair value through profit or loss as the Group intends to hold these investments for the foreseeable future. NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2018 Management Discussion & Analysis UEM Edgenta Berhad Annual Report 2018 About UEM Edgenta Chairman’s Statement 158