Annual Report 2019

FAR EAST CONSORTIUM INTERNATIONAL LIMITED 250 For the year ended 31 March 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 47. FINANCIAL INSTRUMENTS (continued) b. Financial risk management objectives and policies (continued) Credit risk and impairment assessment (continued) Loan receivables/amounts due from related parties/bank balances and deposits The credit risk of loan receivables and amounts due from related parties is managed through an internal process. The Group actively monitors the outstanding amounts owed by each debtor and uses past due information to assess whether credit risk has increased significantly since initial recognition. The directors of the Company consider that the probability of default is minimal after assessing the counter-parties financial background and underlying assets held by the related parties. The credit risks on pledged deposits, restricted bank deposits, deposit in a financial institution, and bank balances and deposits are limited because the counterparties are banks/financial institutions with high credit ratings assigned by international credit-rating agencies. The Group’s internal credit risk grading assessment comprises the following categories: Internal credit rating Description Trade debtors/ contract assets Other financial assets Low risk The counterparty has a low risk of default and does not have any past-due amounts Lifetime ECL – not credit-impaired 12-month ECL Watch list Debtor frequently repays after due dates but usually settle in full Lifetime ECL – not credit-impaired 12-month ECL Doubtful There have been significant increases in credit risk since initial recognition through information developed internally or external resources Lifetime ECL – not credit-impaired Lifetime ECL – not credit-impaired Loss There is evidence indicating the asset is credit-impaired Lifetime ECL – credit-impaired Lifetime ECL – credit-impaired Write-off There is evidence indicating that the debtor is in severe financial difficulty and the Group has no realistic prospect of recovery Amount is written off Amount is written off