ANNUAL REPORT 2021 163 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS ʹˢ˥ ˧˛˘ Ѓˡ˔ˡ˖˜˔˟ ˬ˘˔˥ ˘ˡ˗˘˗ ʦʤ ʷ˘˖˘ˠ˕˘˥ ʥʣʥʤ (CONT’D) 4. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 4.1 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D) Key Sources of Estimation Uncertainty (cont’d) (e) Impairment of Trade and Financing Receivables The Group uses the simplified approach to estimate a lifetime expected credit loss allowance for all trade and financing receivables. The Group develops the expected loss rates based on the payment profiles of past sales (including changes in the customer payment profile in response to the COVID-19 pandemic) and the corresponding historical credit losses, and adjusts for qualitative and quantitative reasonable and supportable forward-looking information. If the expectation is different from the estimation, such difference will impact the carrying values of trade and financing receivables. The carrying amounts of trade and financing receivables as at the reporting date are disclosed in Notes 14 and 16 to the financial statements respectively. For impaired loans, advances and financing (“loan(s)”) which are individually assessed, judgement by management is required in the estimation of the amount and timing of future cash flows in the determination of impairment losses. In estimating these cash flows, judgements are made about the realisable value of collateral pledged and the borrower’s financial position. These estimations are based on assumptions and the actual results may differ from these, hence, resulting in changes to impairment losses recognised. (f) Impairment of Non-Trade Receivables The loss allowances for non-trade financial assets are based on assumptions about risk of default and expected loss rates. It also requires the Group to assess whether there is a significant increase in credit risk of the non-trade financial asset at the reporting date. The Group uses judgement in making these assumptions and selecting appropriate inputs to the impairment calculation, based on the past payment trends, existing market conditions as well as forward-looking estimates at the end of each reporting period. The carrying amounts of other receivables, amounts owing by subsidiaries, amounts owing by associates and amounts owing by joint ventures as at the reporting date are disclosed in Notes 17, 18, 19 and 20 to the financial statements respectively. (g) Fair Value Estimates for Unquoted Financial Assets The Group carries certain financial assets that are not traded in an active market at fair value. The Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. The amount of fair value changes would differ if the Group uses different valuation methodologies and assumptions, and eventually affect profit and/or other comprehensive income. The carrying amounts of these financial assets as at the reporting date are disclosed in Note 11 to the financial statements. (h) Impairment of Development Costs The assessment of whether development costs and other intangible assets are impaired requires an estimation of the value in use of the cash-generating unit to which these assets are allocated. Estimating a value in use amount requires management to make an estimate of the expected future cash flows from the cash generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amounts of development costs and other intangible assets as at the reporting date are disclosed in Note 12 to the financial statements.
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