Page 127 - Urban Renewal Authority 2023-24 Annual Report

2. Material accounting policies (Continued)

(h) Credit losses and impairment of assets (Continued)
(i) Credit losses from financial instruments and lease receivables (Continued)
ECLs are measured on either of the following bases:

– 12-month ECLs: these are losses that are expected to result from possible default events
within the 12 months after the reporting date; and

– lifetime ECLs: these are losses that are expected to result from all possible default events
over the expected lives of the items to which the ECLs model applies.

Loss allowances for trade receivables and lease receivables are always measured at an amount
equal to lifetime ECLs. ECLs on these financial assets are estimated using a provision matrix
based on the Group’s historical credit loss experience, adjusted for factors that are specific to
the debtors and an assessment of both the current and forecast general economic conditions at
the reporting date.

For all other financial instruments, the Group recognises a loss allowance equal to 12-month
ECLs unless there has been a significant increase in credit risk of the financial instrument since
initial recognition, in which case the loss allowance is measured at an amount equal to lifetime
ECLs.

Significant increases in credit risk
In assessing whether the credit risk of a financial instrument has increased significantly since
initial recognition, the Group compares the risk of default occurring on the financial instrument
assessed at the reporting date with that assessed at the date of initial recognition. In making
this reassessment, the Group considers that a default event occurs when (i) the borrower is
unlikely to pay its credit obligations to the Group in full, without recourse by the Group to
actions such as realising security (if any is held); or (ii) the financial asset is 90 days past due. The
Group considers both quantitative and qualitative information that is reasonable and
supportable, including historical experience and forward-looking information that is available
without undue cost or effort.

In particular, the following information is taken into account when assessing whether credit risk
has increased significantly since initial recognition:

– failure to make payments of principal or interest on their contractually due dates;

– an actual or expected significant deterioration in a financial instrument’s external or
internal credit rating (if available);

– an actual or expected significant deterioration in the operating results of the debtor; and

– existing or forecast changes in the technological, market, economic or legal environment
that have a significant adverse effect on the debtor’s ability to meet its obligation to the
Group.

URA ANNUAL REPORT 2023-24 125