Page 84 - ICD-AR22-English

Notes to the Separate Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2022
Sukuk Investments carried at amortised cost
Investment instruments shall be measured at amortised cost if both the following conditions are met:
• the investment is held within a business model whose objective is to hold such investments in order to collect expected cashflows till maturity of the instrument; and
• the investment represents either a debt type instrument or other investment instrument having reasonably determinable effective yield.
These investments are measured using effective profit method at initial recognition minus capital/redemption payments and minus any reduction for impairment.
Any other investment instruments not classified as per amortised cost or fair value through equity, are classified as fair value through separate income statement (FVIS).
On initial recognition, the Corporation makes an irrevocable election to designate certain equity instruments that are not designated at fair value through separate income statement to be classified as investments at fair value through equity.
Business model: the business model reflects how the Corporation manages the assets in order to generate cash flows. That is, whether the Corporation’s objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of assets. If neither of these is applicable (e.g. financial assets are held for trading purposes), then the financial assets are classified as part of ‘other’ business model and measured at FVIS. Factors considered by the Corporation in determining the business model for a group of assets include past experience on how the cash flows for these assets were collected, how the asset’s performance is evaluated and reported to key management personnel, how risks are assessed and managed and how managers are compensated.
vii) Impairment of investments held at fair value through changes in members’ equity
The Corporation exercises judgment to consider impairment on the financial assets including equity investments held at fair value through members’ equity, at each reporting date. This includes determination of a significant or prolonged decline in the fair value of equity investments below cost. The determination of what is 'significant' or 'prolonged' requires judgment. In making this judgment, the Corporation evaluates among other factors, the normal volatility in share prices. In addition, the Corporation considers impairment to be appropriate when there is evidence of deterioration in the financial health of the investee, industry and sector performance, changes in technology, and operational and financing cash flows.
The Corporation considers 30% or more, as a reasonable measure for significant decline below its cost, irrespective of the duration of the decline. Prolonged decline represents decline below cost that persists for 1 year or longer irrespective of the amount.
82 ICD ANNUAL REPORT 2022