Page 210 - Bank-Muamalat-AR2020

208 BANK MUAMALAT MALAYSIA BERHAD About Us Our Leadership Our Strategy
ANNUAL REPORT FY2020

Notes to the fiNaNcial statemeNts
31 December 2020 (16 JamaDil awal 1442h)

3. SIGNIFICANT ACCOuNTING JuDGMENTS, ESTIMATES AND ASSuMPTIONS
The preparation of financial statements requires the Management to make judgments, estimates and assumptions that affect
the application of policies and reported amounts of assets, liabilities, income and expenses. Although these estimates are based
on the Management’s best knowledge of current events and actions, actual results may differ from those estimates. Critical
accounting estimates and assumptions used that are significant to the financial statements and areas involving higher degree of
judgment and complexity, are as follows:
3.1 Going concern

The Management of the Group and the Bank has made an assessment of its ability to continue as a going concern and is
satisfied that it has the resources to continue in business for the foreseeable future. Furthermore, the Management is not
aware of any material uncertainties that may cast significant doubt upon the Group’s and the Bank’s ability to continue as
a going concern. Therefore, the financial statements continue to be prepared on the going concern basis.
3.2 Impairment of financial investments portfolio (Notes 5 and 31)
The Group and the Bank review their debt instruments at FVOCI, and financial investments at amortised cost under
MFRS 9, which requires the recognition of ECL at each reporting date to reflect change in credit risk of the financial
investments not at FVTPL. MFRS 9 incorporates forward-looking and historical, current and forecasted information into
ECL estimation.
In carrying out the impairment review, the following Management’s judgements are required:

(i) Determination whether the investment is impaired based on certain indicators, such as, amongst others, difficulties
of the issuers or obligors, deterioration of the credit quality of the issuers or obligors; and
(ii) Determination of ECL that reflect:

(a) An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
(b) The time value of money; and

(c) Reasonable and supportable information that is available without undue cost or effort at the reporting date
about past events, current conditions and forecasts of future economic conditions.
3.3 Impairment losses on financing of customers (Notes 7 and 30)

The Group and the Bank review individually its significant financing of customers at each reporting date to assess whether
an impairment loss should be recorded in the income statement. In particular, Management’s judgement is required in
the estimation of the amount and timing of future cash flows when determining the impairment loss. In estimating these
cash flows, the Group and the Bank make judgements about the customer’s financial situation and the net realisable value
of collateral. These estimates are based on assumptions on a number of factors and actual results may differ, resulting in
future changes to the allowances.