Page 86 - Annual Report

HONG KONG ACADEMY OF MEDICINE HONG KONG ACADEMY OF MEDICINE
香 香港醫學專科學院 香 香港醫學專科學院
醫
科
學
學
科
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學
專
港
院
學
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醫
院
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024 FOR THE YEAR ENDED 31 DECEMBER 2024

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

g) Credit losses and impairment of assets g) Credit losses and impairment of assets (Continued)

(i) Credit losses from financial instruments (i) Credit losses from financial instruments (Continued)

The Group recognises a loss allowance for expected credit losses (“ECLs”) on the Significant increases in credit risk
financial assets measured at amortised cost (including cash and cash equivalents and
other receivables. 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
Measurement of ECLs 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
ECLs are a probability-weighted estimate of credit losses over the expected life of the when (i) the debtor is unlikely to pay its credit obligations to the Group in full, without
financial instrument. Credit losses are measured as the present value of all expected cash recourse by the Group to actions such as realising security (if any is held); or (ii) the
shortfalls (i.e. the difference between the cash flows due to the Group in accordance with financial asset is 90 days past due. The Group considers both quantitative and qualitative
the contract and the cash flows that the Group expects to receive). information that is reasonable and supportable, including historical experience and
forward-looking information that is available without undue cost or effort.
The expected cash shortfalls are discounted using the following discount rates where the
effect of discounting is material: In particular, the following information is taken into account when assessing whether
credit risk has increased significantly since initial recognition:
– fixed-rate financial assets: effective interest rate determined at initial recognition or
an approximation thereof; – failure to make payments of principal or interest on their contractually due dates;

– variable-rate financial assets: current effective interest rate; – an actual or expected significant deterioration in a financial instrument’s external or
internal credit rating (if available);
The maximum period considered when estimating ECLs is the maximum contractual – an actual or expected significant deterioration in the operating results of the debtor;
period over which the Group is exposed to credit risk.
– existing or forecast changes in the technological, market, economic or legal
In measuring ECLs, the Group takes into account reasonable and supportable information environment that have a significant adverse effect on the debtor’s ability to meet its
that is available without undue cost or effort. This includes information about past events, obligation to the Academy;
current conditions and forecasts of future economic conditions.
– an actual or expected internal credit rating downgrade for the debtor;
ECLs are measured on either of the following bases:
– an actual or expected significant change in the operating results of the debtor;
– 12-month ECLs: these are losses that are expected to result from possible default
events within the 12 months after the reporting date; and – significant changes in the expected performance and behaviour of the debtor.

– lifetime ECLs: these are losses that are expected to result from all possible default Depending on the nature of the financial instruments, the assessment of a significant
events over the expected life of a financial instrument. 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
The Group applies a simplified approach to measure ECL on time deposits, cash and grouped based on shared credit risk characteristics, such as past due status and credit
cash equivalents, other receivables and amounts due from group entities. Under the risk ratings.
simplified approach, the Group measures the loss based on lifetime ECL.
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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84 HKAM Annual Report 2025