Page 70 - Annual Report

HONG KONG ACADEMY OF MEDICINE
香港醫學專科學院
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

g) Credit losses and impairment of assets (Continued)

(i) Credit losses from financial instruments (Continued)

Measurement of ECLs (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 ECL model
applies.

The Group applies a simplified approach to measure ECL on cash and cash
equivalents, other receivables and amounts due from group entities. Under the
simplified approach, the Group measures the loss based on lifetime ECL.

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 Academy.

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68 HKAM Annual Report 2021