Page 83 - 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 (Continued)

(i) Credit losses from financial instruments (Continued)

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 debtor 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;

– 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;

– an actual or expected internal credit rating downgrade for the debtor;

– an actual or expected significant change in the operating results of the debtor;

– significant changes in the expected performance and behaviour of the debtor.

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.

The measurement of ECL is a function of the probability of default, loss given default (i.e.
the magnitude of the loss if there is a default) and the exposure at default. The
assessment of the probability of default and loss given default is based on historical data
and forward-looking information. Estimation of ECL reflects an unbiased and
probability-weighted amount that is determined with the respective risks of default
occurring as the weights. The historical loss rates are adjusted to reflect current and
forward-looking information on macroeconomic factors affecting the ability of the
customers to settle the receivables.

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香港醫學專科學院 2024 年度報告