KENANGA ANNUAL REPORT 2018

NOTES TO THE FINANCIAL STATEMENTS 31 December 2018 133 ANNUAL REPORT 2018 3. ACCOUNTING POLICIES (CONT’D.) 3.4 Summary of significant accounting policies (cont’d.) (g) Financial assets and liabilities (cont’d.) (ix) Undrawn loan commitments Undrawn loan commitments are commitments under which, over the duration of the commitment, the Group and the Bank are required to provide a loan or financing with pre-specified terms to the customer. From 1 January 2018, these contracts are in the scope of the ECL requirements. The nominal contractual value of undrawn loan commitments, where the loan or financing agreed to be provided is on market terms, are not recorded on in the statement of financial position. The nominal values of these instruments together with the corresponding ECLs are disclosed in Note 10.2(d). (x) Available-for-sale financial investments (Policy applicable before 1 January 2018) Financial investments AFS include equity investments and debt securities. Equity investments classified as AFS are those that are neither classified as held-for-trading nor designated at fair value through profit or loss. Debt securities in this category are those that are intended to be held for an indefinite period of time and that may be sold in response to needs for liquidity or in response to changes in the market conditions. The Group and the Bank had not designated any loans, advances and financing as AFS. After initial measurement, financial investments AFS are subsequently measured at fair value with unrealised gains or losses recognised in other comprehensive income in the “AFS reserve” until the investment is derecognised, at which time the cumulative gain or loss is recognised in “other operating income”, or the investment is determined to be impaired, when the cumulative loss is reclassified from the “AFS reserve” to profit or loss in “impairment losses on financial investments”. Interest income on AFS debt securities is calculated using the effective interest method and is recognised in profit or loss. Foreign exchange gains and losses on monetary instruments are recognised in profit or loss. Dividends on an AFS equity investment are recognised in profit or loss when the right to receive payment is established. Equity investments whose fair value cannot be reliably measured are measured at cost less impairment loss. The Group and the Bank evaluate whether the ability and intention to sell its financial investments AFS in the near term is still appropriate. When the Group and the Bank are unable to trade these financial investments due to inactive markets and management’s intention to do so significantly changes in the foreseeable future, the Group and the Bank may elect to reclassify these financial investments in rare circumstances. Reclassification to loans and receivables is permitted when the financial investments meet the definition of loans and receivables and the Group and the Bank have the intent and ability to hold these assets for the foreseeable future or until maturity. Reclassification to the held-to-maturity category is permitted only when the Group and the Bank have the ability and intention to hold the financial investments accordingly. For a financial investment reclassified from AFS category, any previous gain or loss on that investment that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using the effective interest method. Any difference between the new amortised cost and the expected cash flows is also amortised over the remaining life of the investment using the effective interest method. If the investment is subsequently determined to be impaired, then the amount recorded in equity is reclassified to profit or loss.