NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2023 41 FINANCIAL INSTRUMENTS (CONT’D) (i) Credit risk (cont’d) Movements in allowance for impairment in respect of trade and other receivables and accrued receivables (cont’d) Group Lifetime ECL Company Lifetime ECL Note 2023 2022 2023 2022 $’000 $’000 $’000 $’000 Allowance for impairment on other receivables At 1 January 389,091 336,476 1,048 1,116 Acquisition of subsidiaries – 1,142 – – Impairment loss recognised 743 62,673 – – Translation differences on consolidation (8,977) (11,200) (63) (68) At 31 December 16 380,857 389,091 985 1,048 There is no impairment loss on contract assets. At the reporting date, included in the allowance for impairment on other receivables is an amount of $374.0 million (2022: $382.7 million) relating to amounts owing by HCP Group, as described below. Impairment of amounts owing by HCP Group 2023 During 2023, discussions between the bankruptcy administrator, creditors of Sincere Property Group and potential investors were held. As at 31 December 2023, Sincere Property Group remained under bankruptcy reorganisation and no concrete reorganisation plan has been approved by the Chongqing No 5 Intermediate People’s Court. As at 31 December 2023, the Group assessed that the amounts owing by HCP Group continued to be credit-impaired. The Group assessed the lifetime ECL to be recognised, taking into consideration the latest developments on bankruptcy reorganisation of Sincere Property Group based on available information, prevailing market conditions and price trends of corporate bonds issued by other China real estate developers that face similar debt and liquidity challenges as those faced by Sincere Property Group. Based on the assessment undertaken, the amounts owing by HCP Group remained fully impaired as at 31 December 2023. 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. As at 31 December 2022, discussions between the bankruptcy administrator, creditors of Sincere Property Group and potential investors were ongoing. The Group had 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 continued 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. 41 FINANCIAL INSTRUMENTS (CONT’D) (i) Credit risk (cont’d) Impairment of amounts owing by HCP Group (cont’d) 2022 (cont’d) 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 posed 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 2022. As at 31 December 2022, the amounts owing by HCP Group was 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. As the amounts owing by HCP Group have been fully impaired, any decrease in LGD in isolation would result in a higher 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. Debt investments 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 2023 China – 304,405 (304,405) – 2022 China – 309,488 (309,488) – Australia 20,011 – – – 20,011 309,488 (309,488) – FINANCIALS FINANCIALS ANNUAL REPORT 2023 CITY DEVELOPMENTS LIMITED 221 220
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