Annual Report 2021

167 Notes to the Financial Statements Miramar Hotel and Investment Company, Limited Annual Report 2021 23 Financial risk management and fair values Exposure to credit, liquidity and foreign currency risks arises in the normal course of the Group’s business. The Group is also exposed to equity price risk arising from its equity investments in other entities. The Group’s exposure to these risks and the financial risk management policies and practices used by the Group to manage these risks are described below. (a) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. The Group’s credit risk is primarily attributable to trade receivables. Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis. The Group’s exposure to credit risk arising from cash and bank balances is limited because the counterparties are banks and financial institutions with sound credit ratings. There is no significant concentration of credit risk within the Group. Trade receivables Individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customer’s past history of making payments when due and current ability to pay, and take into account information specific to the customer as well as pertaining to the economic environment in which the customer operates. Trade receivables are due ranging from 7 to 60 days from the date of billing. Debtors with balances that are more than 60 days past due are generally requested to settle all outstanding balances before any further credit is granted. Normally, the Group does not obtain collateral from customers. The Group measures loss allowances for trade receivables at an amount equal to lifetime ECLs, which is calculated using a provision matrix based on the Group’s historical credit loss experience and patterns, adjusted for factors that are specific to the debtors and assessment of both the current and forecast general economic conditions at the reporting date. As at 31 December 2021 and 2020, the Group considered its exposure to credit risk and ECLs for trade receivables is not significant and did not provide any loss allowance in respect of trade receivables except for specific loss allowances of HK$7,598,000 (2020: HK$9,856,000). The following table provides information about the Group’s exposure to credit risk and specific loss allowances for trade receivables: 2021 2020 Gross carrying amount Specific loss allowance Gross carrying amount Specific loss allowance HK$’000 HK$’000 HK$’000 HK$’000 Current 18,740 – 14,635 – Less than 1 month past due 3,851 – 4,503 – 1 to 2 months past due 1,105 – 3,087 – Over 2 months past due 30,526 7,598 33,872 9,856 54,222 7,598 56,097 9,856