NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2025 41 FINANCIAL INSTRUMENTS (CONT’D) (i) Credit risk (cont’d) Impairment of amounts owing by HCP Group As at 31 December 2024, Sincere Property Group remained under bankruptcy reorganisation, and no reorganisation plan had been finalised. In 2025, the reorganisation plan received approval from the Chongqing No. 5 Intermediate People’s Court following requisite votes secured in a creditors’ meeting and is in the process of being implemented. As at 31 December 2025 and 31 December 2024, the Group assessed that the amounts owing by HCP Group remained to be credit-impaired. The Group assessed lifetime ECL to be recognised, taking into consideration the latest developments at Sincere Property Group based on available information at the reporting dates, prevailing market conditions and price trends of corporate bonds issued by other China real estate developers facing similar debt and liquidity challenges. Based on the assessment undertaken, the amounts owing by HCP Group remained fully impaired. The key parameter applied in estimating the ECL to be recognised include assuming a loss given default (“LGD”) of 100% having considered the uncertainty surrounding the complex bankruptcy reorganisation with the passage of time, which posed challenges to the recovery of the amounts owing by HCP Group. As the implementation of the reorganisation plan is ongoing, the recovery remains uncertain and subject to change as the process progresses. Changes to circumstances and estimates may impact the ECL recognised on the amounts owing by HCP Group. The ECL on the amounts owing by HCP Group is sensitive to the assumptions used. As the amounts owing by HCP Group has been fully impaired, any decrease in LGD in isolation would result in a lower ECL. Non-trade amounts due from subsidiaries, associates and joint ventures The Group and the Company held non-trade receivables from its associates and joint ventures which were lent to associates and joint ventures to meet their funding requirements. In addition, the Company held non-trade receivables from its subsidiaries which were lent to the subsidiaries to meet their funding requirements. Impairment on these balances has been measured on the 12-month and lifetime expected loss basis. Except as disclosed above, the Group uses an approach that is based on an assessment of qualitative and quantitative factors that are indicative of the risk of default, including but not limited to, financial statements of the entities, and applying credit judgement. The amounts of the allowances on the non-trade amounts due from subsidiaries, associates and joint ventures are set out in notes 7, 8 and 9 respectively. 198 | CITY DEVELOPMENTS LIMITED
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