Page 146 - URA Annual Report 2021-22

NOTES TO THE FINANCIAL STATEMENTS
(expressed in Hong Kong Dollars)
3. Financial risk management and fair value of financial instruments (Continued)
(a) Financial risk factors (Continued)
(ii) Credit risk
Credit risk is managed on a group basis. Credit risk arises from cash and bank balances, building rehabilitation loans, and trade and other receivables.
The credit risk on investments at amortised cost is limited as issuers are mainly with high credit ratings assigned by international credit rating agencies.
The credit risk on cash and bank balances is limited because most of the funds are placed in banks with credit ratings, ranging from Aa1 to A3 and there is no concentration in any particular bank.
The credit risk on building rehabilitation loans is limited as the Group has monitoring procedures to ensure that follow-up action is taken to recover overdue debts and place charges on the properties.
The credit risk on trade receivables is limited as rental deposits in the form of cash are usually received from tenants.
The credit risk on other receivables is limited as the Group is entitled to refund and has monitoring procedures to claim for refund of Buyer’s Stamp Duty and Ad Valorem Double Stamp Duty from the Government upon the happening of the refund event in accordance with Stamp Duty Ordinance Chapter 117.
The Group measures loss allowances for trade receivables at an amount equal to lifetime ECLs, which is calculated using a provision matrix. Given the Group has not experienced any significant credit losses in the past, the allowance for expected credit losses is insignificant.
(iii) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through committed credit facilities.
Management monitors rolling forecasts of the Group’s cash and bank balances on the basis of expected cash flow.
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period from the end of the reporting period to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying amounts (except for debt securities issued which include interest element), as the impact of discounting is insignificant.
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