BIMB Integrated Annual Report 2017

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.1 Basis of preparation (continued) (a) Statement of compliance (continued) (iii) MFRSs, Amendments to MFRSs and IC Interpretation that have been issued but are not yet effective to the Group and the Company (continued) The initial application of the accounting standards, amendments and interpretations are not expected to have any material financial impacts to the current period and prior period financial statements of the Group and of the Company except as mentioned in the subsequent paragraphs: MFRS 9, Financial Instruments MFRS 9 replaces the guidance in MFRS 139, Financial Instruments: Recognition and Measurement on the classification and measurement of financial assets and financial liabilities, and on hedge accounting. The standard introduces new requirements for classification and measurement of financial instruments, impairment of financial assets and hedge accounting. The approach for classification of financial assets is driven by cash flow characteristics and the business model in which an asset is held with three measurement categories – amortised cost, fair value through profit or loss (“FVTPL”) and fair value through other comprehensive income (“FVOCI”). For impairment, MFRS 9 introduces an expected-loss impairment model which will require more timely recognition of expected credit losses to reflect changes of credit risk of financial instruments as well as future economic conditions. The Group and the Company anticipate changes to the financial statements in the areas of classification and measurements for financial assets and liabilities and they are as follows: – Financing, advances and others that are classified as financing and receivables as well as investments in debt securities classified as held to maturity under MFRS 139 are expected to be classified as financial asset measured at amortised cost under MFRS 9; – The majority of the debt securities classified as available-for-sale (“AFS”) under MFRS 139 are expected to be classified as investment securities measured at FVOCI; – Financial assets and liabilities held for trading are expected to continued to be measured at FVTPL; and – Investment in equity instruments that are currently classified as AFS and measured at cost due to absence of quoted market price are expected to be classified and measured at FVTPL. The expected changes on the above classification of financial assets and liabilities are not expected to have material impact on the assets value of the Group. Separately, under the new expected loss impairment model, the Group expects that the allowance for impairment on financing and investment in securities to increase by approximately 20% – 30% as compared to the balance as at 31 December 2017. The Group continues to refine and validate the impairment models which may change the actual impact on adoption. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 173 Overview Value Creation Accountability Financial Statements Sustainability Performance Data Shareholders Information 21 st AGM Information Management Discussion & Analysis i a s