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308 MSM MALAYSIA HOLDINGS BERHAD WHO WE ARE STATEMENT & DISCUSSION BY OUR LEADERS HOW WE OPERATE
ANNUAL INTEGRATED REPORT 2021

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(ab) Derivative financial instruments and hedging activities (continued)

Cash flow hedge (continued)
The Group has applied the following Phase 1 reliefs provided by the Amendments to MFRS 9 and MFRS 7
‘Interest Rate Benchmark Reform’ until the uncertainty arising from IBOR reform no longer being present:
• When considering the ‘highly probable’ requirement, the Group has assumed that the IBOR interest rate on
which the Group’s hedged borrowings is based does not change as a result of IBOR reform.
• In assessing whether the hedge is expected to be highly effective on a forward-looking basis the Group has
assumed that the IBOR interest rate on which the cash flows of the hedged borrowings and the interest rate
swap that hedges it are based is not altered by IBOR reform.
• The Group has not recycled the cash flow hedge reserve for designated hedges that are subject to the IBOR
reform.
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.