Page 191 - Bank-Muamalat-AR2020

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Our Performance Sustainability Statement Governance Our Numbers Other Information

2. SIGNIFICANT ACCOuNTING POLICIES (CONT’D.)
2.3 Summary of significant accounting policies (cont’d.)

(b) Financial assets (cont’d.)
(iii) Impairment of financial assets (cont’d.)
(4) Forward looking information

ECL are the unbiased probability-weighted credit losses determined by evaluating a range of possible
outcomes and considering future economic conditions. The reasonable and supportable forward looking
information is based on the collation of macroeconomic data obtained from various external sources,
such as, but not limited to regulators, government and foreign ministries as well as independent research
organisations.

Where applicable, the Bank incorporates forward-looking adjustments in credit risk factors of PD and
LGD used in the ECL calculation; taking into account the impact of multiple probability-weighted future
forecast economic scenarios.
Embedded in ECL is a broad range of forward-looking information as economic inputs, such as:
• Consumer Price Index;
• Unemployment rates;
• House Price Indices; and
• Overnight Policy Rate.
The Bank applies the following three (3) alternative macroeconomic scenarios to reflect an unbiased
probability-weighted range of possible future outcomes in estimating ECL:
Base scenario: This scenario reflects that current macroeconomic conditions continue to prevail; and

Upside and Downside scenarios: These scenarios are set relative to the base scenario, reflecting best and
worst-case macroeconomic conditions based on subject matter expert’s best judgement from current
economic conditions.
(5) Financial investments at FvOCI

The ECL for financial investments measured at FVOCI does not reduce the carrying amount of these
financial assets in the statement of financial position, which remains at fair value. Instead, an amount
equal to the allowance that would arise if the assets were measured at amortised cost is recognised in OCI
as an accumulated impairment amount, with a corresponding charge to profit or loss. The accumulated
loss recognised in OCI is recycled to the profit and loss upon derecognition of the assets.