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SUSTAINABILITY EFFECTIVE CORPORATE FINANCIAL ADDITIONAL DETAILS OF THE ANNUAL
REPORT LEADERSHIP GOVERNANCE STATEMENTS INFORMATION GENERAL MEETING

NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f) Financial assets (continued)
Impairment (continued)
(b) Significant increase in credit risk
The Group considers the probability of default upon initial recognition of asset and whether there has been a
significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a
significant increase in credit risk, the Group compares the risk of a default occurring on the asset as at the reporting
date with the risk of default as at the date of initial recognition. It considers available reasonable and supportable
forward-looking information. 151
The following indicators are incorporated:
• External credit rating (as far as available).
• Actual or expected significant adverse changes in business, financial or economic conditions that are expected
to cause a significant change to the debtor’s ability to meet its obligations.
• Actual or expected significant changes in the operating results of the debtor.
• Significant increases in credit risk on other financial instruments of the same debtor.
• Significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees
or credit enhancements.
• Significant changes in the expected performance and behaviour of the debtor, including changes in the payment MSM MALAYSIA HOLDINGS BERHAD Annual Report 2020
status of debtor in the group and changes in the operating results of the debtor.
Macroeconomic information (such as market interest rates or growth rates) is incorporated as part of the internal
rating model as applicable.

Regardless of the analysis above, a significant increase in credit risk is presumed if a debtor is more than 30 days
past due in making a contractual payment.
(c) Definition of default and credit-impaired financial assets

The Group defines a financial instrument as default, which is fully aligned with the definition of credit-impaired,
when it meets one or more of the following criteria:

Quantitative criteria:
The Group defines a financial instrument as default, when the counterparty fails to make contractual payment
within 180 days of when they fall due.

Qualitative criteria:
The debtor meets unlikeliness to pay criteria, which indicates the debtor is in significant financial difficulty.
The Group considers the following instances:
• the debtor is in breach of financial covenants.
• concessions have been made by the lender relating to the debtor’s financial difficulty.
• it is becoming probable that the debtor will enter bankruptcy or other financial reorganisation.
• the debtor is insolvent.
Financial instruments that are credit-impaired are assessed on individual basis.