BIMB Integrated Annual Report 2017

The key audit matter identified are: How the matter was addressed in our audit Allowance for impaired financing and advances The carrying value of financing and advances held at amortised costs may be misstated, if impairments are not appropriately identified and estimated. Impairment is a subjective area due to the significant level of judgement and appropriateness of assumptions applied by management in determining both collective impairment and individual impairment allowances. Refer to the significant accounting policy in Note 2.5 and 2.11, the disclosure of financing and advances in Note 9 and the disclosure of credit risk in Note 45.3. Our procedures in addressing this key audit matter included: Collective Impairment Allowances • assessed the design and operating effectiveness of management controls implemented in identifying potentially impaired financing, classifying financing and reviewing adequacy of impairment allowances; • evaluated the impairment allowance computation model for consistency of methodology and compliance with MFRS 139, Financial Instruments: Recognition and Measurement and Bank Negara Malaysia Guidelines; • tested the completeness and accuracy of data from underlying systems that is used in the computation models. • assessed the appropriateness of the key assumptions and inputs (eg. default rates and loss rates) used by management in the computations and considered whether they were representative of current circumstances. Individual Impairment Allowances • obtained an understanding and tested the process for identifying impairment indicators within the financing portfolio and consequently, the grading of financing and advances. • assessed the Group’s credit monitoring and review process on the credit worthiness of selected customers. • selected a sample of financing customers (impaired and performing), taking into consideration of industry trends/ macroeconomic factors, and performed the following: Impaired financing: – considered whether the basis of measuring the individual impairment allowances and key judgements exercised were appropriate given the customer’s circumstances. In addition, we also tested the key inputs to the impairment computation including the expected future cash flows, discount rates and valuation of collateral held. Performing financing: – assessed that the selected borrowers did not exhibit any definable weaknesses that may jeopardise the repayment abilities. INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF BIMB HOLDINGS BERHAD (Company No. 423858-X) (Incorporated in Malaysia) 300 BIMB HOLDINGS BERHAD Integrated Annual Report 2017