2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) 2.1 Basis of preparation (continued) (a) Statement of compliance (continued) IFRIC agenda decision – disclosure of revenues and expenses for reportable segments This agenda decision clarified that entities reporting segment information in their financial statements should disclose specified income and expense items for each reportable segment, provided these items are included in the segment profit measure reviewed by the chief operating decision maker (CODM), regardless of whether they are separately reviewed by the CODM. Additionally, entities should apply the requirements for materiality and aggregation under MFRS 101 when determining which additional material items of income and expense should be disclosed in segment reporting. The Group and the Bank is currently assessing the detailed implications of applying IFRIC agenda decision on segment reporting on the Group and the Bank's financial statements. From the high-level preliminary assessment performed, the following potential impacts have been identified as additional disclosure on the other operating income and operating expenses. (b) Basis of measurement The financial statements have been prepared on the historical cost convention except for derivative financial instruments, financial assets at fair value through profit or loss (FVTPL) and fair value through other comprehensive income (FVOCI), which have been measured at fair value. (c) Functional and presentation currency The financial statements are presented in Ringgit Malaysia (RM), which is the Bank’s functional currency. All financial information is presented in RM and has been rounded to the nearest thousand (RM’000), unless otherwise stated. (d) Use of estimates and judgement The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the financial statements in the period in which the estimates are revised and in any future periods affected. The measurement of the impairment of financing, advances and others requires the use of complex models and significant assumptions about future economic conditions and credit behaviour. MFRS 9 introduces the use of macroeconomic factors which include, but is not limited to, private consumption, unemployment rates, inflation and industrial production, and requires an evaluation of both the current and forecast direction of the economic cycle. Incorporating forward-looking information increases the level of judgement as to how changes in these macroeconomic factors will affect ECL. The methodology and assumptions including any forecasts of future economic conditions are reviewed regularly. A number of significant judgements are also required in applying the accounting requirements for measuring ECL, such as: i. Determining criteria for significant increase in credit risk; ii. Choosing appropriate models and assumptions for the measurement of ECL; iii. Establishing the number and relative weightings of forward-looking scenarios for each type of product/market and the associated ECL; iv. Establishing groups of similar financial assets for the purposes of measuring ECL; and v. Identifying and calculating adjustments to model output (model overlay adjustments 295 w w w . b a n k i s l a m. c o m 01 02 03 04 05 06 07 08 FINANCIAL STATEMENTS 09
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