166 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2022 Additional Information We Are Kenanga Message From Our Leaders Our Sustainability Approach How We Are Governed Financial Statements Shareholders’ Information 3. ACCOUNTING POLICIES (CONT’D.) 3.4 Summary of significant accounting policies (cont’d.) (i) Derecognition of financial assets and liabilities (cont’d.) (a) Derecognition due to substantial modification of terms and conditions (cont’d.) When assessing whether or not to derecognise a loan to a customer, amongst others, the Group and the Bank consider the following factors: • Introduction of an equity feature; • Change in counterparty; and • If the modification is such that the instrument would no longer meet the SPPI criterion. If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and the Group recalculates the gross carrying amount based on the revised cash flows of the financial asset and recognises a modification gain or loss in profit or loss. The new gross carrying amount is recalculated by discounting the modified cash flows at the original effective interest rate (or credit-adjusted effective interest rate for POCI financial assets). For financial liabilities, the Bank considers a modification substantial based on qualitative factors and if it results in a difference between the adjusted discounted present value and the original carrying amount of the financial liability of, or greater than, ten percent. For financial assets, this assessment is based on qualitative factors. (b) Derecognition other than for substantial modification - Financial assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when the rights to receive cash flows from the financial asset have expired. The Group and the Bank also derecognise the financial asset if it has both transferred the financial asset and the transfer qualifies for derecognition as follows: • The Group and the Bank have transferred their contractual rights to receive cash flows from the financial asset; or • They retain the rights to the cash flows, but have assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement.
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