CFSL - Annual report 2018

66 CIM FINANCIAL SERVICES LTD ANNUAL REPORT 2018 EXPLANATORY NOTES 30 SEPTEMBER 2018 2. ACCOUNTING POLICIES (CONT’D) 2.5 New or revised standards and interpretations (Cont’d) (i) IFRS 9 Financial Instruments (Cont’d) Impairment (Cont’d) The assessment of credit risk, and the estimation of ECL, are required to be unbiased and probability weighted, and should incorporate all the available information which is relevant to the assessment including information about past events, current conditions and reasonable and supportable forecasts of future events and economic conditions at the reporting date. In addition, the estimation of ECL should take into account the time value of money. The Group shall make use of the general approach to record ECL, except the trade and other receivables which will be based on the simplified approach.The Group is currently finalising the impact of the adoption of ECL on its financial assets at 30 September 2018. The Group shall use the modified retrospective approach for recognising the adjustment to the 30 September 2018 figures. Hedge accounting IFRS 9 includes a new general hedge accounting model, which aligns hedge accounting more closely with risk management. The new model does not fundamentally change the types of hedging relationships or the requirement to measure and recognize ineffectiveness under IAS 39; however, under the new model more hedging strategies that are used for risk management may qualify for hedge accounting. No hedging is undertaken by the Group and hence there is no impact. (ii) lFRS 15 Revenue from Contracts with Customers In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers, effective for periods beginning on 1 January 2018 with early adoption permitted. IFRS 15 defines principles for recognising revenue and will be applicable to all contracts with customers. However, interest and fee income integral to financial instruments and leases will continue to fall outside the scope of IFRS 15 and will be regulated by the other applicable standards (e.g., IFRS 9, and IFRS 16). The five steps in the model prescribed by IFRS 15 consists of identifying the contract with the customer; identifying the performance obligations in the contract; determining the transaction price; allocating the transaction price to the performance obligations in the contracts; and recognising revenue when (or as) the entity satisfies a performance obligation. Guidance is provided on topics such as the point in which revenue is recognised, accounting for variable consideration, costs of fulfilling and obtaining a contract and various related matters. The standard also specifies a comprehensive set of disclosure requirements regarding the nature, extent and timing as well as any uncertainty of revenue and corresponding cash flows with customers. The Group will adopt the modified retrospective method on transition to the new standard from 1 October 2018 and the comparatives will not be restated. Based on an initial assessment, management has considered the effects of applying the new standard on the Group’s financial statements. During the financial year 2018, the Group performed an analysis of its revenue streams and concluded that IFRS 15 will not have a significant impact on the opening balance of retained earnings. (iii) IFRS 16 Leases The IASB issued the new standard for accounting for leases - IFRS 16 Leases in January 2016. The new standard does not significantly change the accounting for leases for lessors. However, it does require lessees to recognise most leases on their balance sheets as lease liabilities, with the corresponding right-of-use assets. Lessees must apply a single model for all recognised leases, but will have the option not to recognise ‘short-term’ leases and leases of ‘low-value’ assets. Generally, the profit or loss recognition pattern for recognised leases will be similar to today’s finance lease accounting, with interest and depreciation expense recognised separately in the statement of profit or loss. IFRS 16 is effective for annual periods beginning on or after 1 January 2019. The Group is currently assessing the impact of IFRS 16 on its financial statements.