KENANGA ANNUAL REPORT 2017

2. CHANGES IN ACCOUNTING POLICIES AND REGULATORY REQUIREMENT (CONT’D.) 2.3 Significant change in regulatory requirement BNM Policy Document on capital funds On 3 May 2017, BNM issued a revised policy document, Capital Funds. The key change in the revised policy document is the removal of the requirement for banking institutions to maintain a reserve fund. The Group and the Bank had previously maintained the reserve fund via transfer from retained earnings to Statutory Reserve. Arising from this change, during the current financial period, the Group and the Bank had reclassified balances in Statutory Reserve to retained earnings. 3. ACCOUNTING POLICIES 3.1 Basis of preparation The financial statements of the Group and of the Bank have been prepared on a historical cost basis unless otherwise indicated. 3.2 Statement of compliance The financial statements of the Group and of the Bank have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards (“IFRSs”), and the requirements of the Companies Act, 2016 in Malaysia. 3.3 Functional and presentation currency The financial statements are presented in Ringgit Malaysia (“RM”), which is also the Bank’s functional currency and all values are rounded to the nearest thousand (“RM’000”), unless otherwise stated. 3.4 Summary of significant accounting policies (a) Basis of consolidation The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries as at the reporting date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Bank and consistent accounting policies are applied for like transactions and events in similar circumstances. The Bank controls an investee if and only if the Bank has all the following: (i) Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee); (ii) Exposure, or rights, to variable returns from its investment with the investee; (iii) The ability to use its power over the investee to affect its returns. Annual Report 2017 31 December 2017 101 notes to the financial statements