Page 126 - EXIM-Bank_Annual-Report-2023

EXIM BANk MALAySIA
124 A Vision to Serve Empowering Growth Management Discussion and Analysis
ANNUAL REPORT 2023
Notes to the fiNaNcial statemeNts

2. MATErIAL ACCouNTING PoLICy INForMATIoN (cont’d)
2.4 Summary of material accounting policy information (cont’d)

(f) Financial assets (cont’d)
Initial recognition and measurement (cont’d)

In order for a financial asset to be classified and measured at amortised cost or FVOCI, it needs to give rise
to cash flows that are ‘solely payments of principal and interests (“SPPI”) on the principal amount outstanding.
This assessment is referred to as the SPPI test and is performed at an instrument level.

Business Model assessments
The Group and the Bank determine its business model at the level that best reflect how it manages groups of
financial assets to achieve its business objective.

The Group and the Bank holds financial asset to generate returns and provide a capital base to provide for
settlement of claims as they arise. The Group and the Bank considers the timing, amount and volatility of cash flow
requirements to support insurance liability portfolios in determining the business model for the assets as well as
the potential to maximise return for shareholders and future business development.
The Group and the Bank business model is not assessed on an instrument-byinstrument basis, but a higher level of
aggregated portfolios that is based on observable factors and is determined by the key management personnel
on the basis of both:
- The way that assets are managed and their performance is reported to them; and
- The contractual cash flow characteristics of the financial asset.
The expected frequency, value and timing of asset sales are also important aspects of the Group’s and the Bank’s
assessment. The Group and the Bank assess its business models at each reporting period in order to determine
whether the models have changed since the preceding period.

The business model assessments are based on reasonably expected scenarios without taking ‘worst case’ or
‘stress case’ scenarios into account. If cash flows after initial recognition are realised in a way that is difference from
the Group’s and the Bank’s original expectations, the Group and the Bank do not change the classification of the
remaining financial assets held in that business model, but incorporates such information when assessing newly
originated or newly purchased financial assets going forward.

Change in business model is not expected to be frequent, but should such event take place, it must be:
- Determined by the Group’s and the Bank’s senior management as a result of external on internal changes;
- Significant to the Group’s and the Bank’s operations; and
- Demonstrable to external parties.

A change in the business model will occur only when the Group and the Bank begin or cease to perform an activity
that is significant to its operations. Change in the objective of the business model must be effected before the
reclassification date.