KENANGA ANNUAL REPORT 2019

154 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2019 3. ACCOUNTING POLICIES (CONT’D.) 3.4 Summary of significant accounting policies (cont’d.) (k) Impairment of financial assets (cont’d.) (vii) Collateral repossessed The Group’s and the Bank’s accounting policy under MFRS 9 remains the same as it was under MFRS 139. The Group’s and the Bank’s policy are to determine whether a repossessed asset can be best used for its internal operations or should be sold. Assets determined to be useful for the internal operations are transferred to their relevant asset category at the lower of their repossessed value or the carrying value of the original secured asset. Assets for which selling is determined to be a better option are transferred to assets held for sale at their fair value (if financial assets) and fair value less cost to sell for non-financial assets at the repossession date in line with the Group’s and the Bank’s policy. In its normal course of business, the Group and the Bank do not physically repossess properties or other assets in their retail portfolio, but engages external agents to recover funds, generally at auction, to settle outstanding debt. Any surplus funds are returned to the customers/obligors. As a result of this practice, the residential properties under legal repossession processes are not recorded on the balance sheet. (viii) Write-offs The Group’s and the Bank’s accounting policy under MFRS 9 remains the same as it was under MFRS 139. Financial assets are written off either partially or in their entirety only when the Group and the Bank have stopped pursuing the recovery. If the amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to credit loss expense. (ix) Forborne and modified loans The Group and the Bank sometimes make concessions or modifications to the original terms of loans as a response to the borrower’s financial difficulties, rather than taking possession or otherwise enforce collection of collateral. The Group and the Bank consider a loan forborne when such concessions or modifications are provided as a result of the borrower’s present or expected financial difficulties and the Group and the Bank would not have agreed to them if the borrower had been financially healthy. Indicators of financial difficulties include defaults on covenants, or significant concerns. Forbearance may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated, any impairment is measured using the original EIR as calculated before the modification of terms. It is the Group’s and the Bank’s policy to monitor forborne loans to help ensure that future payments continue to be likely to occur. The Group’s and the Bank’s policy is to monitor forborne loans to help ensure that future payments continue to be likely to occur. Derecognition decisions and classification between Stage 2 and Stage 3 are determined on a case-by-case basis. If these procedures identify a loss in relation to a loan, it is disclosed and managed as an impaired Stage 3 forborne asset until it is collected or written off.