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2.
Summary of significant accounting policies (cont’d.)
2.3 Standards issued but not yet effective (cont’d.)
MFRS 9 Financial Instruments (cont’d.)
(i)
Classification and measurement (cont’d.)
Loans and receivables are held to collect contractual cash flows and are expected to give rise to cash flows representing
solely payments of principal and interest. The Group analysed the contractual cash flow characteristics of those
instruments and concluded that they meet the criteria for amortised cost measurement under MFRS 9. Therefore,
reclassification for these instruments is not required.
(ii) Impairment
The Group will apply the simplified approach and record lifetime expected losses on all trade receivables. The recognition
and measurement of impairment under MFRS 9 will be more forward-looking and will result in earlier recognition of
credit losses as compared to MFRS 139. Hence, the total expected credit losses allowances computed under MFRS 9
is expected to be higher than the total allowance for impairment on trade and other receivables under MFRS 139. Upon
the initial adoption of MFRS 9, a negative adjustment will be made to opening retained profits, which will decrease the
equity and net assets of the Group. As certain basis and assumptions are still being refined, the quantitative impact to the
overall financial statements has not been finalised at this juncture.
(iii) Hedge accounting
The Group has decided to continue applying hedge accounting as set out in MFRS 139 to all hedges until the project on
accounting for macro hedging is completed by International Accounting Standards Board (IASB).
MFRS 16 Leases
MFRS 16 will replace MFRS 117 Leases, IC Interpretation 4 Determining whether an Arrangement contains a Lease, IC
Interpretation 115 Operating Lease-Incentives and IC Interpretation 127 Evaluating the Substance of Transactions Involving the
Legal Form of a Lease. MFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases
and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance
leases under MFRS 117.
At the commencement date of a lease, a lessee will recognise a liability to make lease payments and an asset representing the
right to use the underlying asset during the lease term. Lessees will be required to recognise interest expense on the lease
liability and the depreciation expense on the right-of-use asset.
Lessor accounting under MFRS 16 is substantially the same as the accounting under MFRS 117. Lessors will continue to classify
all leases using the same classification principle as in MFRS 117 and distinguish between two types of leases: operating and
finance leases.
MFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early application is permitted but not before an
entity applies MFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective
approach. The Group and the Company is currently assessing the impact of MFRS 16 and plans to adopt the new standard on
the required effective date.
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AirAsia Berhad
REPORTS AND FINANCIAL STATEMENTS