KENANGA ANNUAL REPORT 2017

3. ACCOUNTING POLICIES (CONT’D.) 3.4 Summary of significant accounting policies (cont’d.) (g) Impairment of financial assets The Group and the Bank assess at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. (i) Financial investments held-to-maturity Evidence of impairment may include indications that the debt issuer is experiencing significant financial difficulty and default or delinquency in interest or principal repayments. For financial investments carried at amortised cost in which there is objective evidence of impairment, impairment loss is measured as the difference between the carrying amount and the present value of the estimated future cash flows discounted at the original EIR. The amount of the impairment loss is recognised in profit or loss. (ii) Financial investments AFS Significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that financial investments classified as AFS are impaired. The cumulative impairment loss is measured as the difference between the acquisition cost (net of any principal repayment and amortisation) and the current fair value, less any impairment loss previously recognised in profit or loss. Impairment losses on investment in equity instruments classified as AFS recognised are not reversed in profit or loss subsequent to their recognition. Increase in fair value, if any, subsequent to the impairment loss is recognised in other comprehensive income. Reversals of impairment losses on debt instruments classified as AFS are recognised in profit or loss if the increase in fair value can be objectively related to an event occurring after the recognition of the impairment loss in other comprehensive income. (iii) Loans, advances and financing Individual assessment The criteria that the Group and the Bank use to determine that there is objective evidence of an impairment include: – any significant financial difficulty of the obligor; – a breach of contract, such as a default or delinquency in interest or principal repayments; – a high probability of bankruptcy or other financial reorganisation of the obligor; – concerns over the viability of the obligor’s business operations and its capacity to trade successfully out of financial difficulties and to generate sufficient cash flows to service its debt obligations; and – any adverse news or developments affecting the local economic conditions or business environment which will adversely affect the repayment capacity of the borrower. Kenanga Investment Bank Berhad 31 December 2017 110 notes to the financial statements