KENANGA ANNUAL REPORT 2018

NOTES TO THE FINANCIAL STATEMENTS 31 December 2018 132 KENANGA INVESTMENT BANK BERHAD 3. ACCOUNTING POLICIES (CONT’D.) 3.4 Summary of significant accounting policies (cont’d.) (g) Financial assets and liabilities (cont’d.) (vii) Debt issued and other borrowed funds After initial measurement, debt issued and other borrowed funds are subsequently measured at amortised cost. Amortised cost is calculated by taking into account any discount or premium on issued funds, and costs that are an integral part of the effective interest rate (“EIR”). A compound financial instrument which contains both a liability and an equity component is separated at the issue date in the issuer’s financial statements. (viii) Financial assets and financial liabilities at fair value through profit or loss Financial assets and financial liabilities in this category are those that are not held for trading and have been either designated by management upon initial recognition or are mandatorily required to be measured at fair value under MFRS 9. Management only designates an instrument at FVTPL upon initial recognition when one of the following criteria are met. Such designation is determined on an instrument- by-instrument basis: • The designation eliminates, or significantly reduces, the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognising gains or losses on them on a different basis. • The liabilities (and assets until 1 January 2018 under MFRS 139) are part of a group of financial liabilities (or financial assets, or both under MFRS 139), which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy. • The liabilities (and assets until 1 January 2018 under MFRS 139) containing one or more embedded derivatives, unless they do not significantly modify the cash flows that would otherwise be required by the contract, or it is clear with little or no analysis when a similar instrument is first considered that separation of the embedded derivative is prohibited. Financial assets and financial liabilities at FVTPL are recorded in the statement of financial position at fair value. Changes in fair value are recorded in profit or loss. Interest earned or incurred on instruments designated at FVTPL is accrued in interest income or interest expense, respectively, using the EIR, taking into account any discount/premium and qualifying transaction costs being an integral part of instrument.