| CIM FINANCE. INTEGRATED REPORT 2022 138 EXPLANATORY NOTES 30 SEPTEMBER 2022 4. FINANCIAL RISK MANAGEMENT (CONT’D) 4.1 Financial risk factors (Cont’d) (d) Credit risk (Cont’d) Impairment assessment (Cont’d) Credit quality (Cont’d) The Groupmaintains a credit risk rating based on the days past due and the obligor is categorised as follows: Write-offs Financial assets arewrittenoffeither partiallyor in their entiretyonlywhen there isno reasonableexpectationof recovery suchas the death or liquidation of a debtor. If the amount to bewritten off is greater than the accumulated loss allowance, the difference isfirst treatedasanaddition to theallowance that is thenappliedagainst thegross carryingamount. It constitutesaderecognition event. Any subsequent recoveries are credited to the credit loss expense. Modified loans Sometimes theGroupmakes concessions ormodifications to theoriginal terms of loans as a response to theborrower’s financial difficulties, rather than taking possession or to otherwise enforce disposal/repossession of collateral. Indicators of financial difficulties include default on covenants, bankruptcy, or significant concerns raised. Once the terms have been renegotiated, any impairment ismeasured using the original interest rates as calculated before themodification of terms. Theseaccountsareclassifiedashighriskandderecognitiondecisionsandclassificationsbetweenstage2andstage3aredetermined on a case-by-case basis. If the accounts were impaired, they will be closely monitored until it is collected or written off. And if the accounts were classified in the underperforming category, the Groupwill reassess whether there has been a significant increase in credit risk. Onceanaccount hasbeenclassifiedas forborne, itwill remain forborne for aminimumprobationperiodof 6months. Inorder for the accounts to be reclassified out of the forborne category, the customer has tomeet all of the following criteria: • All of its facilities has to be considered performing; • Theminimumprobation of period of 6months has passed; and • Regular payments have beenmade in accordance with the terms and conditions agreed If modifications are substantial either quantitatively or qualitatively, the loan is derecognised as explained under write offs. Risk rating Description Performing None of the facilities of the obligor have been due for more than 30 days. Watchlist Any one of the facilities granted to the obligor has been in arrears for more than 30 days but is not considered to be credit-impaired. Non-performing Any one of the facilities granted to the obligor has been in arrears for more than 90 days or the obligor is unlikely to pay its credit obligations in full, without recourse to actions such as realising security.
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