Page 126 - Exim iar24_Ebook

EXIM BANK MALAYSIA
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NOTES TO THE FINANCIAL STATEMENTS

2. MATERIAL ACCOUNTING POLICY INFORMATION (cont’d)

2.4 Summary of material accounting policy information (cont’d)
(f) Financial assets (cont’d)

Business Model assessments (cont’d)
The business model assessments are based on reasonably expected scenarios without taking ‘worst case’ or
‘stress case’ scenarios into account. If cash flows after initial recognition are realised in a way that is difference
from the Group’s and the Bank’s original expectations, the Group and the Bank do not change the classification
of the remaining financial assets held in that business model, but incorporates such information when assessing
newly originated or newly purchased financial assets going forward.

Change in business model is not expected to be frequent, but should such event take place, it must be:
- Determined by the Group’s and the Bank’s senior management as a result of external on internal changes;
- Significant to the Group’s and the Bank’s operations; and
- Demonstrable to external parties.
A change in the business model will occur only when the Group and the Bank begin or cease to perform an activity
that is significant to its operations. Change in the objective of the business model must be effected before the
reclassification date.
The SPPI test

The Group and the Bank assesses the contractual terms to identify whether they meet the SPPI test.
‘Principal’ for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may
change over the life of the financial asset (for example, if there are repayments of principal or amortisation of the
premium/discount).
The most significant elements if interest within a debt arrangement are typically the consideration for the time
value of money and credit risk. To make the SPPI assessment, the Group and the Bank apply judgement and
considers relevant factors such as the currency in which the financial assets is denominated, and the period for
which the interest rate is set.

(i) Financial assets at amortised cost
Financial assets at amortised cost are subsequently measured using the Effective Interest Rate (“EIR”) or
the Effective Profit Rate (“EPR”) method and are subject to impairment. Gains and losses are recognised in
statement of profit or loss when the asset is derecognised, modified or impaired.
(ii) Financial assets at FVOCI

For debt instruments at FVOCI, interest income, foreign exchange revaluation and impairment losses or
reversals are recognised in the statement of profit or loss and computed in the same manner as for financial
assets measured at amortised cost. The remaining fair value changes are recognised in other comprehensive
income (“OCI”). Upon derecognition, the cumulative fair value change recognised in OCI is recycled to profit
or loss.