Page 71 - 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)

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 ECL 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.

Basis of calculation of interest income

Interest income recognised in accordance with note 3(n) is calculated based on
the gross carrying amount of the financial asset unless the financial asset is
credit-impaired, in which case interest income is calculated based on the
amortised cost (i.e. the gross carrying amount less loss allowance) of the financial
asset.

At each reporting date, the Group assesses whether a financial asset is
credit-impaired. A financial asset is credit-impaired when one or more events that
have a detrimental impact on the estimated future cash flows of the financial asset
have occurred.

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 delinquency in interest or principal
payments;

– 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.

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香港醫學專科學院 2021 年度報告 69