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) Debt investments The Group limits its exposure to credit risk on investments held by investing only with counterparties that are of acceptable credit quality. The exposure to credit risk for debt investments at the reporting date by geographic region was as follows: Mandatorily at FVTPL At amortised cost Carrying amount Gross amount Lifetime ECL (credit impaired) Carrying amount $’000 $’000 $’000 $’000 2022 China – 309,488 (309,488) – Australia 20,011 – – – 20,011 309,488 (309,488) – 2021 China – 311,512 (293,769) 17,743 Singapore 142,486 – – – Australia 32,923 – – – 175,409 311,512 (293,769) 17,743 Derivatives Derivatives are only entered into with bank and financial institution counterparties with sound credit ratings. Cash and cash equivalents The cash and cash equivalents are held with bank and financial institution counterparties with sound credit ratings. Impairment on cash and cash equivalents has been measured on the 12-month expected loss basis and reflects the short maturities of the exposures. The Group considers that its cash and cash equivalents have low credit risk based on the external credit ratings of the counterparties. The amount of the allowance on cash and cash equivalents as at 31 December 2022 and 31 December 2021 was negligible. (ii) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group monitors its liquidity risk and maintains a level of cash and cash equivalents and credit facilities deemed adequate by management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows. 42 FINANCIAL INSTRUMENTS (CONT’D) (i) Credit risk (cont’d) 2021 (cont’d) In October 2021, the Chongqing No. 5 Intermediate People’s Court accepted the bankruptcy reorganisation application by a creditor against Sincere Property and a bankruptcy administrator was subsequently appointed. In addition, a local credit rating agency downgraded Sincere Property’s credit rating and its existing domestic corporate bonds as Sincere Property was unable to redeem its corporate bonds that matured in 2021. As at 31 December 2021, 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 account the latest developments of Sincere Property Group based on publicly available information as described above, 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, following regulatory tightening and systemic changes on financing imposed on China’s real estate sector. The key parameter applied in estimating the ECL to be recognised include assuming a loss given default (“LGD”) of up to 95% 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. Based on the assessment undertaken, the Group estimated that no additional impairment is required on the amounts owing by HCP Group, other than an impairment loss of $6.1 million on the interest income recognised on the amounts owing by HCP Group during the year. At 31 December 2021, the carrying value of the amount owing by HCP Group was $63.9 million (net of impairment loss of $331.2 million) which was classified as other receivables (note 16). As the bankruptcy reorganisation for Sincere Property 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. A decrease in the LGD in isolation would result in a higher recoverable amount. An increase in the LGD in isolation would result in a lower recoverable amount. 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 nontrade 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 amount of allowance on the non-trade amounts due from associates was negligible. 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. CITY DEVELOPMENTS LIMITED ANNUAL REPORT 2022 FINANCIALS 222 223
RkJQdWJsaXNoZXIy ODIwNTc=