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FoR BetteR RetuRns Annual Report 2022 169

notes to the
financial statements
for the year ended 31 december 2022

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.19 Impairment Of Financial Assets (continued)

(a) Financial assets accounted for at Amortised Cost and FVOCI (continued)

Significant increase in the credit risk
the group and KWap consider the probability of default upon the initial recognition of financial assets and
whether there was a significant increase in the credit risk on an ongoing basis throughout each reporting
period. in the assessment of a significant increase in the credit risk, the group and KWap compare the
risk of the occurrence of default on the financial asset as at the reporting date against the risk of default
as at the date of the initial recognition, taking into consideration available, reasonable and supportable
forward-looking information.
the following indicators are incorporated:

• internal credit rating;
• external credit rating (as far as available); and
• actual or expected significant adverse changes in business, financial or economic conditions that are
expected to cause a significant change to the debtor’s ability to meet its obligations.

macroeconomic information (such as market interest rates or growth rates) is incorporated as part of the
internal rating model.

regardless of the analysis above, a significant increase in the credit risk is presumed if a debtor is more than
30 days past due in making a contractual payment.

Low credit risk exemption
financial instruments with the following characteristics are considered to have low credit risk at the reporting
date:

• a low risk of default;
• strong capacity to fulfill the contractual cash flow obligations in the near term by the borrower; and
• adverse changes will not necessarily reduce the ability of the borrower to make payments when they fall
due.

Definition of default and credit-impaired financial assets
the group and KWap define the default of a financial instrument, which is fully aligned with the definition of
credit-impairment, when it fulfills one or more of the following criterias:
(a) Quantitative criteria:

failure of the counterparty to make contractual payment within 90 days when they fall due.