FGV Audited Financial Statements 2020

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (h) Financial assets (continued) Impairment (continued) (i) Impairment for debt instruments and financial guarantee contracts (continued) The measurement of ECL reflects: • an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; • the time value of money; and • reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. a) General 3-stage approach for other receivables, deposits, loans due from intercompany and non-trade amounts due from intercompany At each reporting date, the Group measures ECL through loss allowance at an amount equal to 12 month ECL if credit risk on a financial instrument or a group of financial instruments has not increased significantly since initial recognition. For all other financial instruments, a loss allowance at an amount equal to lifetime ECL is required. The measurement details of ECL are disclosed in the relevant notes to the financial assets. b) Simplified approach for trade receivables, lease receivables, trade amounts due from intercompany and contract assets The Group applies the MFRS 9 simplified approach to measure ECL which uses a lifetime ECL for trade receivables and contract assets. The measurement details of ECL are disclosed in the relevant notes to the financial assets. The credit risk assessment basis and credit risk rating of the debt instruments are disclosed in Note 4(a) to the financial statements. (ii) Significant increase in credit risk The Group considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk, the Group compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportable forward-looking information. The following indicators are incorporated: - internal credit rating; - external credit rating (as far as available); - actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the debtor’s ability to meet its obligations; - actual or expected significant changes in the operating results of the debtor; - significant increases in credit risk on other financial instruments of the same debtor; - significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements; - significant changes in the expected performance and behaviour of the debtor, including changes in the payment status of debtor in the group and changes in the operating results of the debtor. 35 Notes to the Financial Statements For The Financial Year Ended 31 December 2020 Audited Financial Statements 2020