Page 82 - Annual Report

HONG KONG ACADEMY OF MEDICINE
香 港 醫 學 專 科 學 院
香港醫學專科學院
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

2. BASIS OF PREPARATION AND MATERIAL ACCOUNTING POLICY INFORMATION (Continued)

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 over the expected life of the
financial instrument. 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.

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 life of a financial instrument.

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.

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80 HKAM Annual Report 2024