Annual Report 2019

ANNUAL REPORT 2019 185 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 March 2019 3. SIGNIFICANT ACCOUNTING POLICIES (continued) Financial instruments (continued) Financial assets (continued) Impairment of financial assets (upon application HKFRS 9 with transitions in accordance with note 2) (continued) (v) Measurement and recognition of 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 adjusted by 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. Generally, the ECL is the difference between all contractual cash flows that are due to the Group in accordance with the contract and the cash flows that the Group expects to receive, discounted at the effective interest rate determined at initial recognition. For a lease receivable, the cash flows used for determining the ECL is consistent with the cash flows used in measuring the lease receivable in accordance with HKAS 17 Leases . The grouping is regularly reviewed by management to ensure the constituents of each group continue to share similar credit risk characteristics. Interest income 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 amortised cost of the financial asset. The Group recognises an impairment gain or loss in profit or loss for all financial instruments by adjusting their carrying amount, with the exception of trade debtors and contract assets, where the corresponding adjustment is recognised through a loss allowance account. Classification and subsequent measurement of financial assets (before application of HKFRS 9 on 1 April 2018) Financial assets are classified into the following specified categories: financial assets at FVTPL, held-to- maturity investments, available-for-sale (“AFS”) financial assets and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.