Page 128 - Urban Renewal Authority 2023-24 Annual Report

NOTES TO THE FINANCIAL STATEMENTS

(expressed in Hong Kong Dollars)

2. Material accounting policies (Continued)

(h) Credit losses and impairment of assets (Continued)
(i) Credit losses from financial instruments and lease receivables (Continued)
Significant increases in credit risk (Continued)
Depending on the nature of the financial instruments, the assessment of a significant increase in
credit risk is performed on either an individual basis or a collective basis. When the assessment
is performed on a collective basis, the financial instruments are grouped based on shared credit
risk characteristics, such as past due status and credit risk ratings.

ECLs are remeasured at each reporting date to reflect changes in the financial instrument’s
credit risk since initial recognition. Any change in the ECLs amount is recognised as an
impairment gain or loss in profit or loss. The Group recognises an impairment gain or loss for all
financial instruments with a corresponding adjustment to their carrying amount through a loss
allowance account.

Evidence that a financial asset is credit-impaired includes the following observable events:

– significant financial difficulties of the debtor;

– a breach of contract, such as a default or past due event;

– it becoming probable that the borrower will enter into bankruptcy or other financial
reorganisation;

– significant changes in the technological, market, economic or legal environment that have
an adverse effect on the debtor; or

– the disappearance of an active market for a security because of financial difficulties of the
issuer.

Write-off policy
The gross carrying amount of a financial asset or lease receivable is written off (either partially or
in full) to the extent that there is no realistic prospect of recovery. This is generally the case
when the Group determines that the debtor does not have assets or sources of income that
could generate sufficient cash flows to repay the amounts subject to the write-off.

Subsequent recoveries of an asset that was previously written off are recognised as a reversal of
impairment in profit or loss in the period in which the recovery occurs.

(ii) Impairment of other assets
Assets are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units). Assets that suffered an impairment are reviewed
for possible reversal of the impairment at each reporting date.

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