Page 84 - 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 (Continued)

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, except for investments in
financial assets that are measured at FVOCI (recycling), for which the loss allowance is
recognised in other comprehensive income and shall not reduce the carrying amount of
the financial asset in the statement of financial position.

Basis of calculation of interest income

Interest income recognised in accordance with note 2(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 debtor 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.

Write-off policy

The gross carrying amount of a financial asset is written off (either partially or in full) to the
extent that there is no realistic prospect of recovery. This is generally the case when the
Group determines that the debtor does not have assets or sources of income that could
generate sufficient cash flows to repay the amounts subject to the write-off. Financial
assets written off may still be subject to enforcement activities under the Group’s recovery
procedures, taking into account legal advice where appropriate.

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82 HKAM Annual Report 2024