Page 80 - Annual Report

HONG KONG ACADEMY OF MEDICINE
院
專
港
學
科
醫
學
香 香港醫學專科學院
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

f) Inventories

Inventories are carried at the lower of cost and net realisable value. Cost is calculated
using the weighted average method.

Net realisable value is the estimated selling price in the ordinary course of business less
the estimated costs of completion and the estimated costs necessary to make the sale.

When inventories are sold, the carrying amount of those inventories is recognised as an
expense in the period in which the related revenue is recognised. The amount of any
write-down of inventories to net realisable value and all losses of inventories are
recognised as an expense in the period the write-down or loss occurs. The amount of
any reversal of any write-down of inventories is recognised as a reduction in the amount
of inventories recognised as an expense in the period in which the reversal occurs.

g) Credit losses and impairment of assets

(i) Credit losses from financial instruments

The Group recognises a loss allowance for expected credit losses (“ECLs”) on the
financial assets measured at amortised cost (including cash and cash equivalents,
other receivables and amounts due from group entities.

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are
measured as the present value of all expected cash shortfalls (i.e. the difference
between the cash flows due to the Group in accordance with the contract and the
cash flows that the Group expects to receive).

The expected cash shortfalls are discounted using the following discount rates
where the effect of discounting is material:

– f ixed-rate financial assets: effective interest rate determined at initial
recognition or an approximation thereof;

– variable-rate financial assets: current effective interest rate;

The maximum period considered when estimating ECLs is the maximum
contractual period over which the Group is exposed to credit risk.

In measuring ECLs, the Group takes into account reasonable and supportable
information that is available without undue cost or effort. This includes information
about past events, current conditions and forecasts of future economic conditions.

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78 HKAM Annual Report 2023