BIMB Integrated Annual Report 2019

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.5 Financial instruments (continued) (ii) Classification and subsequent measurement (continued) Financial liabilities All financial liabilities are subsequently measured at amortised cost other than those categorised as fair value through profit or loss. Fair value through profit or loss category comprises financial liabilities that are derivatives or financial liabilities that are specifically designated into this category upon initial recognition. Financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss. Investment accounts Investment accounts are either: (a) Unrestricted investment accounts An unrestricted investment account (“URIA”) refers to a type of investment account where the investment account holder (“IAH”) provides the Group with the mandate to make the ultimate decision without specifying any particular restrictions or conditions. The URIA is structured under Mudharabah and Wakalah contracts. Impairment allowances required on the assets for investment accounts are charged to and borne by the investors. (b) Restricted investment accounts Restricted investment account (“RIA”) refers to a type of investment account where the IAH provides a specific investment mandate to the Group such as purpose, asset class, economic sector and period of investment. RIA is accounted for as off balance sheet as the Group has no risk and reward in respect of the assets related to the RIA or to the residual cash flows from those assets except for the fee income generated by the Group for managing the RIA. The Group also has no ability to use power over the RIA to affect the amount of the Group return. The RIA is structured under Wakalah contract whereby the IAH appoints the Group as the agent to invest the funds provided by IAH to finance customers with a view of earning profits and the Group receives fees for the agency service provided. Refer to Note 19 for the disclosure. Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Fair value arising from financial guarantee contracts are classified as deferred income and are amortised to profit or loss using a straight-line method over the contractual period or, when there is no specified contractual period, recognised in profit or loss upon discharge of the guarantee. Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of: • the amount of the allowance for impairment; and • the premium received on initial recognition less income recognised in accordance with the principal of MFRS 15. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 (CONTINUED) 192 Integrated Annual Report 2019 Group Overview Sustaining The Group Management Discussion & Analysis Group Governance