NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2022 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2022 10 FINANCIAL ASSETS (CONT’D) 2021 (cont’d) Based on the assessment undertaken, the Group assessed that no additional impairment was required on the investment in the bond. At 31 December 2021, the carrying value of the bond was $17.7 million (net of impairment loss). 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 investment in the bond. The ECL on the investment in the bond is also sensitive to the assumptions used. A decrease in LGD in isolation would result in a higher recoverable amount. An increase in LGD in isolation would result in a lower recoverable amount. (d) Equity investments designated at FVOCI The Group designated the equity investments shown below as equity investments at FVOCI because these equity investments represent investments that the Group intends to hold for the long-term for strategic purposes. Group Company Fair value Dividend income recognised Fair value Dividend income recognised $’000 $’000 $’000 $’000 2022 Unquoted investment in a fellow subsidiary: – Hong Leong Holdings Limited 407,903 2,295 407,903 2,295 Unquoted investment in a non-related company: – Singapore-Suzhou Township Development Pte. Ltd. 24,261 905 – – Quoted investment in a fellow subsidiary: – Hong Leong Finance Limited 26,006 1,306 21,868 1,098 2021 Unquoted investment in a fellow subsidiary: – Hong Leong Holdings Limited 327,577 1,890 327,577 1,890 Unquoted investment in a non-related company: – Singapore-Suzhou Township Development Pte. Ltd. 30,293 880 – – Quoted investment in a fellow subsidiary: – Hong Leong Finance Limited 26,006 1,387 21,868 1,167 Other equity investments designated at FVOCI not included in the table above are insignificant to the Group and the Company. During the year, the Group disposed one of the other equity investments designated at FVOCI due to privatisation of the investee. The investment had a fair value of $13,342,000 at the date of disposal, and the cumulative gain on disposal amounted to $4,003,000. The cumulative gain on disposal was reclassified from fair value reserve to accumulated profits. Information about the Group’s and the Company’s exposures to credit and market risks, and fair value measurement, is included in note 42. 10 FINANCIAL ASSETS (CONT’D) 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 investment in the bond continue to be credit-impaired. 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 investment in the bond. Based on the assessment undertaken, the Group recognised an additional impairment of $18 million on the investment in the bond during the year. As at 31 December 2022, the investment in the bond has 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 investment in the bond. The ECL on the investment in the bond is also sensitive to the assumptions used. As the investment in bond has been fully impaired, any decrease in LGD in isolation would result in a higher recoverable amount. 2021 Having considered that Sincere Property had entered into bankruptcy reorganisation and its credit rating and domestic corporate bonds were downgraded by a local credit rating agency during 2021 (see note 42), the Group assessed that the investment in the bond continued to be credit-impaired. At 31 December 2021, 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 in note 42, 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 included assuming a LGD of approximately 90% which was 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 faced similar debt and liquidity challenges as those faced by Sincere Property Group. CITY DEVELOPMENTS LIMITED ANNUAL REPORT 2022 FINANCIALS 174 175
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