KENANGA ANNUAL REPORT 2018

NOTES TO THE FINANCIAL STATEMENTS 31 December 2018 147 ANNUAL REPORT 2018 3. ACCOUNTING POLICIES (CONT’D.) 3.4 Summary of significant accounting policies (cont’d.) (k) Impairment of financial assets (cont’d.) (Policy applicable before 1 January 2018) (cont’d.) (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. The Group and the Bank first assess loans individually whether objective evidence of impairment exists. If there is objective evidence that an impairment loss has been incurred, the amount of loss is measured as the difference between the loan’s carrying amount and the present value of the estimated future cash flows discounted at the financial asset’s original EIR. Where appropriate, the calculation of present value of estimated future cash flows of a collateralised loan reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.