Annual Report 2022 169 ABOUT US LEADERSHIP PERSPECTIVE SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS Other Information Notes to the Financial Statements for the Financial Year Ended 31 March 2022 (Cont’d) 47. FINANCIAL INSTRUMENTS (CONT’D) 47.1 FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (b) Credit Risk The Group’s exposure to credit risk, or the risk of counterparties defaulting, arises mainly from trade and other receivables. The Group manages its exposure to credit risk by the application of credit approvals, credit limits and monitoring procedures on an ongoing basis. For other financial assets (including cash and bank balances), the Group minimises credit risk by dealing exclusively with high credit rating counterparties. The Company’s exposure to credit risk arises principally from loans and advances to subsidiaries. The Company monitors the results of these subsidiaries regularly and repayments made by the subsidiaries. (i) Credit Risk Concentration Profile The Group’s major concentration of credit risk relates to the amounts owing by two (2) customers (2021 - two (2) customers) which constituted approximately 80% (2021 - 70%) of its trade receivables (excluding accrued income) at the end of the financial year. (ii) Exposure to Credit Risk At the end of the financial year, the maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the statement of financial position of the Group and of the Company after deducting any allowance for impairment losses (where applicable). (iii) Assessment of Impairment Losses At each reporting date, the Group assesses whether any of financial assets at amortised cost are credit impaired. The gross carrying amounts of those financial assets are written off when there is no reasonable expectation of recovery (i.e. the debtor does not have assets or sources of income to generate sufficient cash flows to repay the debt) despite they are still subject to enforcement activities. Trade Receivables The Group applies the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The Group considers any receivables having financial difficulty or with significant balances outstanding past due and more than 365 days are deemed credit impaired. The expected loss rates are based on the payment profiles of sales over a period of 12 months from the measurement date and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle their debts.
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