NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2022 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2022 42 FINANCIAL INSTRUMENTS (CONT’D) (i) Credit risk (cont’d) At the reporting date, included in the allowance for impairment on other receivables is an amount of $382.7 million (2021: $331.2 million) relating to amounts owing by HCP Group, as described below. Impairment of amounts owing by HCP Group 2022 During 2022, certain subsidiaries within Sincere Property Group entered into consolidated bankruptcy reorganisation in addition to Sincere Property which entered into bankruptcy reorganisation in 2021 (see below). Discussions between the bankruptcy administrator, creditors of Sincere Property Group and potential investors are ongoing. The Group has filed its claims against Sincere Property with the bankruptcy administrator. As at 31 December 2022, the Group assessed that the amounts owing by HCP Group continue to be creditimpaired. The Group assessed the lifetime ECL to be recognised, taking into consideration the latest developments of Sincere Property Group based on available information, prevailing market conditions and price trends of corporate bonds issued by other China real estate developers with credit ratings similar to that of Sincere Property Group and face similar debt and liquidity challenges as those faced by Sincere Property Group. The key parameter applied in estimating the ECL to be recognised include assuming a loss given default (“LGD”) of 100% which was estimated based on the range of decline in trading prices of bonds issued by other China real estate developers with credit ratings similar to that of Sincere Property Group and face similar debt and liquidity challenges as those faced by Sincere Property Group. The Group also considered the increased uncertainty surrounding the complex bankruptcy reorganisation with the passage of time, which pose challenges to the recovery of the amounts owing by HCP Group. Based on the assessment undertaken, the Group recognised an additional impairment of $62.7 million on the amounts owing by HCP Group during the year. As at 31 December 2022, the amounts owing by HCP Group have been fully impaired. As the bankruptcy reorganisation for Sincere Property Group is ongoing, its outcome is uncertain and evolving. 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 also sensitive to the assumptions used. As the amounts owing by HCP Group have been fully impaired, any decrease in LGD in isolation would result in a higher recoverable amount. 2021 During 2021, as part of the Group’s disposal of its interest in HCP, the Group had entered into various agreements with the HCP Group whereby it was agreed that (i) an amount owing by the Group to HCP Group of $263.7 million would be set off against the amounts owing by HCP Group; and (ii) the collateral held by the Group in respect of the amounts owing by HCP Group, which related to shares in an investment holding company that held an equity interest in a property-owning entity which had been pledged by HCP Group to the Group, in respect of the amounts owing by HCP Group, would be transferred to the Group, as settlement of $54.1 million (RMB260.0 million) of the amounts owing by HCP Group. The above arrangements resulted in a utilisation of $8.2 million (RMB39.2 million) impairment loss previously recognised (note 9(d)). As at 31 December 2021, after the offset arrangements, the Group had gross amounts owing by HCP Group of $395.1 million (classified under other receivables in note 16) and amounts owing to HCP Group of $50.3 million (note 31). 42 FINANCIAL INSTRUMENTS (CONT’D) (i) Credit risk (cont’d) Movements in allowance for impairment in respect of trade and other receivables and accrued receivables The movements in the allowance for impairment in respect of trade and other receivables (excluding amounts owing by subsidiaries (note 7), associates (note 8) and joint ventures (note 9)) and accrued receivables during the year are as follows: Group Lifetime ECL Company Lifetime ECL 2022 2021 2022 2021 $’000 $’000 $’000 $’000 Allowance for impairment on trade receivables and accrued receivables At 1 January 17,025 25,212 135 716 Impairment loss recognised/ (reversed) 22,389 (2,448) (46) (431) Impairment loss utilised (1,204) (5,796) (7) (150) Disposal of subsidiaries (232) – – – Translation differences on consolidation (2,341) 57 – – At 31 December 35,637 17,025 82 135 Impairment losses (reversed)/recognised on trade receivables were included in “other operating expenses”. Group Lifetime ECL Company Lifetime ECL Note 2022 2021 2022 2021 $’000 $’000 $’000 $’000 Allowance for impairment on other receivables At 1 January 336,476 5,129 1,116 1,129 Reclassified from amounts owing by joint ventures 9 – 329,481 – – Acquisition of subsidiaries 1,142 – – – Impairment loss recognised 62,673 – – – Translation differences on consolidation (11,200) 1,866 (68) (13) At 31 December 389,091 336,476 1,048 1,116 There is no impairment loss on contract assets. CITY DEVELOPMENTS LIMITED ANNUAL REPORT 2022 FINANCIALS 220 221
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