. 84
NOTESTOTHE
FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017
BAKER
TECHNOLOGY
L IMI TED
THE BE ST
I N US
2.
SUMMARYOF SIGNIFICANTACCOUNTINGPOLICIES (CONT’D)
2.2
Standards issuedbutnot yet effective (cont’d)
FRS109
Financial Instruments
FRS 109 introduces new requirements for classification andmeasurement of financial assets, impairment
of financial assets andhedgeaccounting. Financial assets areclassifiedaccording to their contractual cash
flow characteristics and the business model under which they are held. The impairment requirements in
FRS109 arebasedon anexpectedcredit lossmodel and replace the FRS39 incurred lossmodel. Adopting
the expected credit losses requirementswill require theCompany tomake changes to its current systems
andprocesses.
(a)
Classificationandmeasurement
TheGroup currentlymeasures its investments inunquoted equity securities at cost. Under FRS 109,
the Group will be required to measure the investment at fair value. The difference between the
current carrying amount and the fair value as at 31 December 2017, amounting to approximately
$734,000, wouldbe recognised in theopening retained earningswith the corresponding tax impact
when theGroup applies FRS109.
For its available-for-sale debt securities, the Group intends to hold the debt instrument to collect
contractual cash flowsandsell, andaccordinglymeasuredat fair value throughothercomprehensive
income when it applies FRS 109. The Group does not expect any significant impact to arise from
thesechanges.
(b)
Impairment
FRS 109 requires the Group and Company to record expected credit losses on all of its debt
securities, loans, trade receivables and financial guarantees, either on a 12-month or a lifetime
basis. TheGroup expects to apply the simplified approach and record lifetime expected losses on
all trade receivables. TheGroupdoes not expect any significant impact on the loss allowanceupon
the applicationof the expected credit lossmodel.
