NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2024 (CONT’D) 43. FINANCIAL INSTRUMENTS (CONT’D) 43.1 FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (b) Credit Risk (Cont’d) (iii) Assessment of Impairment Losses (Cont’d) Financial Guarantee Contracts Corporate guarantees for borrowing facilities granted to subsidiaries are financial guarantee contract. Inputs, Assumptions and Techniques used for Estimating Impairment Losses The Company closely monitors the subsidiaries’ financial strength to reduce the risk of loss. The Company considers there is a significant increase in credit risk when a subsidiary’s financial position deteriorates significantly. A financial guarantee contract is credit impaired when: - The subsidiary is unlikely to repay its obligation to the bank in full; or - The subsidiary is having a deficit in equity and is continuously loss making. The Company determines the probability of default of the guaranteed amounts individually using internal information available. Allowance for Impairment Losses All of the financial guarantee contracts are considered to be performing, have low risks of default and historically there were no instances where these financial guarantee contracts were called upon by the parties of which the financial guarantee contracts were issued to. Accordingly, no loss allowances were identified based on 12-month expected credit losses. (c) Liquidity Risk Liquidity risk arises mainly from general funding and business activities. The Group and the Company practise prudent risk management by maintaining sufficient cash balances and the availability of funding through certain committed credit facilities. FINANCIAL STATEMENTS 213 INTEGRATED ANNUAL REPORT 2024
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