BIMB Integrated Annual Report 2019

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.12 Impairment (continued) Impairment of financial assets (continued) (c) Incorporation of forward-looking information Relevant macroeconomic factors are incorporated in the risk parameters as appropriate. The key macroeconomics variables (“MEV”) that are incorporated in determining ECLs include, but not limited to, Kuala Lumpur Composite Index (“KLCI”), House Price Index (“HPI”), Consumer Price Index (“CPI”), Unemployment Rate and Industrial Production Index (“IPI”). Forward-looking macroeconomic forecasts are generated by the Group Economist as part of the ECL process. An economic forecast is accompanied with three economic scenarios: a base case, which is the median scenario, assigned a 60% probability of occurring, and two less likely scenarios, one upside and one downside, each assigned 30% and 10% probability of occurring respectively. Selected MEVs are projected over the forecast period, and they could have a material impact in determining ECLs. Forecasted MEVs are derived by Economist using time series econometrics. The data series are procured from the official source such as Department of Statistics Malaysia (“DOSM”), BNM and other government agencies. Prior to MEV forecast, Economists would gather his or her intelligence from discussion with the policy makers, institutional investors and other news flow (main stream and social media) in order to form an opinion. The opinion may cover the economic policies, business cycle and financial market condition. This will be the main input before embarking MEV forecast exercise. The methodology and assumptions including any forecasts of future economic conditions are reviewed regularly. (d) Credit impaired financial assets At each reporting date, the Group assesses whether financial assets carried at amortised cost and debt instruments at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a negative impact on the estimated future cash flows of the financial asset have occurred. The criteria that the Group uses to determine that there is objective evidence of an impairment loss include: • significant financial difficulty of the issuer or obligor; • a breach of contract, such as default or delinquency in profit or principal payments; • the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise; • it is probable that the borrower will enter bankruptcy or other financial reorganisation; or • based on external credit assessment institutions rating which indicates high likelihood of default. (e) Presentation of allowance for ECL in the statement of financial position Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. For debt instruments at FVOCI, the loss allowance is charged to profit or loss and is recognised in other comprehensive income. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 (CONTINUED) 199 BIMB HOLDINGS BERHAD 199701008362 (423858-X) Shareholders’ Information Financial Statements Additional Information Disclosure Summary