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Annual Report 2014 | S P SETIA BERHAD GROUP | 117

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 October 2014

V. FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(c) New/Revised FRSs, Amendments to FRSs and IC Interpretation that are not yet effective (cont’d)

MFRS 9, Financial Instruments

MFRS 9 specifies how an entity should classify and measure financial assets and financial liabilities. This standard requires all

financial assets to be classified based on how an entity manages its financial assets (its business model) and the contractual cash

flow characteristics of the financial asset. Financial assets are to be initially measured at fair value. Subsequent to initial recognition,

depending on the business model under which these assets are acquired, they will be measured at either fair value or at amortised

cost.

In respect of the financial liabilities, the requirements are generally similar to the former FRS 139. However, this standard requires

that for financial liabilities designated as at fair value through profit or loss, changes in fair value attributable to the credit risk of

that liability are to be presented in other comprehensive income, whereas the remaining amount of the change in fair value will be

presented in the profit or loss.

The Group is in the process of assessing the full impact of MFRS 15 and MFRS 9 on the financial statements of the Group and of

the Company in the year of initial application.

(d) Significant accounting judgements and estimates

The preparation of financial statements requires management to exercise judgement in the process of applying the accounting policies.

It also requires the use of accounting estimates and assumptions that affect reported amounts of assets and liabilities and disclosures

of contingent assets and liabilities at the reporting date, and reported amounts of income and expenses during the financial year.

Although these estimates are based on management’s best knowledge of current events and actions, historical experiences and

various other factors, including expectations for future events that are believed to be reasonable under the circumstances, actual

results may ultimately differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in

the period in which the estimate is revised and in any future periods affected.

(i) Critical judgement made in applying accounting policies

The following are judgements made by management in the process of applying the Group’s accounting policies that have the

most significant effect on amounts recognised in the financial statements:

Classification between investment properties and owner-occupied properties

The Group determines whether a property qualifies as an investment property, and has developed certain criteria based on

FRS

140 Investment Property

in making that judgement.

In making its judgement, the Group considers whether a property generates cash flows largely independently of other assets

held by the Group. Owner-occupied properties generate cash flows that are attributable not only to the property, but also to

other assets used in the production or supply process.

Some properties comprise a portion that is held to earn rental or for capital appreciation and another portion that is held for use

in the production or supply of goods and services or for administrative purposes.

If these portions could be sold separately (or leased out separately under a finance lease), the Group accounts for the portions

separately.