54 FGV HOLDINGS BERHAD NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (ab) Derivative financial instruments and hedging activities (continued) Cash flow hedge (continued) The Group has applied the following reliefs provided by the Amendments to MFRS 9 and MFRS 7 ‘Interest Rate Benchmark Reform - Phase 2’: • Hedge designation: When the Phase 1 amendments cease to apply, the Group will amend its hedge designation to reflect changes which are required by IBOR reform, but only to make one or more of the following changes: a) designating an alternative benchmark rate (contractually or non-contractually specified) as a hedged risk; b) amending the description of the hedged item, including the description of the designated portion of the cash flows or fair value being hedged; or c) amending the description of the hedging instrument. The Group amends its hedge documentation to reflect this change in designation by the end of the reporting period in which the changes are made. These amendments to the hedge documentation do not require the Group to discontinue its hedge relationships. • Amounts accumulated in the cash flow hedge reserve: When the Group amends its hedge designation as described above, the accumulated amount outstanding in the cash flow hedge reserve is deemed to be based on the alternative benchmark rate. For discontinued hedging relationships, when the interest rate benchmark on which the hedged future cash flows were based has changed as required by IBOR reform, the amount accumulated in the cash flow hedge reserve is also deemed to be based on the alternative benchmark rate for the purpose of assessing whether the hedged future cash flows are still expected to occur. (ac) Provisions Provisions are recognised when: • the Group has a present legal or constructive obligation as a result of past events; • it is probable that an outflow of resources will be required to settle the obligation; and • a reliable estimate of the amount can be made. When it is probable that costs will exceed total contract revenue, a provision for onerous contract is recognised. Where the Group expects a provision to be reimbursed (for example, under an insurance contract), the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as a finance cost.
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