KENANGA ANNUAL REPORT 2019

251 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2019 50. FINANCIAL RISK MANAGEMENT (CONT’D.) (a) Credit risk (cont’d.) Impairment assessment For the purpose of determining the risk of default occurring, default is defined based on credit risk management practises. Portfolio Default Loans, advances and financing Share margin financing Trade receivables - stockbroking Other receivables - advisory fees Other receivables - factoring Debt securities at amortised cost or FVOCI Declaration of event of default Margin of financing below 100% or declaration of event of default More than 30 days past due from contra losses More than 30 days past due More than 30 days past due Declaration of event of default In the context of the Group and the Bank, two approaches as specified in MFRS 9 shall be applied in the measurement of ECL i.e. general approach and simplified approach. General approach recognises impairment based on a three-stage process which is intended to reflect the deterioration in credit quality of a financial instrument. General approach - Stage 1 covers instruments that have not deteriorated significantly in credit quality since initial recognition or (where the optional low credit risk simplification is applied) that have low credit risk. - Stage 2 covers financial instruments that have deteriorated significantly in credit quality since initial recognition (unless the low credit risk simplification has been applied and is relevant) but that do not have objective evidence of a credit loss event. - Stage 3 covers financial assets that have objective evidence of impairment at the reporting date.