KENANGA ANNUAL REPORT 2019

155 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.) (ix) Forborne and modified loans (cont’d.) When the loan has been renegotiated or modified but not derecognised, the Group and the Bank also reassess whether there has been a significant increase in credit risk, as set out in Note 50(a). The Group and the Bank also consider whether the assets should be classified as Stage 3. Once an asset has been classified as forborne, it will remain forborne for a minimum 6 months probation period. In order for the loan to be reclassified out of the forborne category, the customer has to meet all of the following criteria: • All of its facilities have to be considered performing; • The probation period of half year has passed from the date the forborne contract was considered performing; • Regular payments of more than an insignificant amount of principal or interest have been made during at least half of the probation period; and • The customer does not have any contract that is more than 30 days past due. (l) Impairment of non-financial assets The Group and the Bank assess at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment assessment for an asset is required, the Group and the Bank make an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value-in-use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre- tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis. Impairment losses are recognised in profit or loss except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.