perspective perspective - ChartNexus

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(v) Financial instruments
Description
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A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or
equity instrument of another enterprise.
A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another
enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are
potentially favourable, or an equity instrument of another enterprise.
A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another
enterprise, or to exchange financial instruments with another enterprise under conditions that are potentially
unfavourable.
Financial instruments recognised in the balance sheet
Financial instruments recognised in the balance sheet include deposits, cash and bank balances, investments, receivables,
payables and borrowings. The recognition method adopted for financial instruments recognised in the balance sheet is
disclosed in the individual accounting policy statements associated with each item.
The financial assets and liabilities of the Group and Company are denominated in Ringgit Malaysia.
Fair value estimation for disclosure purposes
In assessing the fair values of financial instruments, the Group uses a variety of methods and makes assumptions that are
based on market conditions existing at each balance sheet date. In particular, the fair values of financial assets and financial
liabilities are estimated by discounting the future contractual cash flows at the current market interest rate available to the
Group for similar financial instruments. Fair values of other investments are determined based on the market value at the
balance sheet date.
The face values of financial assets (less any estimated credit adjustments) and financial liabilities with a maturity period of
less than one year are assumed to approximate their fair values.
3 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group is exposed to various financial risks including foreign currency exchange risk, interest rate risk, credit risk, liquidity
risk and cash flow risk in the normal course of business. The Group’s overall financial risk management objective is to ensure that
the Group creates value for its shareholders. The Group focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the financial performance of the Group. Financial risk management is carried out through
risks review and internal control systems. The Board of Directors regularly reviews these risks to ensure that the Group’s financial
risk management policies are adhered to.
(i) Foreign currency exchange risk
The Group is not exposed to currency risk as foreign currency transactions entered into within the Group are minimal.
(ii) Interest rate risk
The Group’s income and operating cash flows are substantially independent of changes in market interest rates. Interest
rate exposure arises from the Group’s borrowings and is managed through the use of fixed and floating rates debts. The
Group is actively monitoring its borrowings to ensure that the Group will benefit most from the operating environment.
(iii) Credit risk
Concentration of credit risk with respect to trade receivables is limited as the ownership and rights to the properties revert
to the Group in the event of default. The Group’s historical experience in collection of trade receivables falls within the
recorded allowances. Due to these factors, management believes that no additional credit risk beyond amounts provided for
collection losses is inherent in the Group’s trade receivables.
UNITED MALAYAN LAND BHD