Annual Report 2023

186 2023 Annual Report Transport International Holdings Limited INDEPENDENT AUDITOR’S REPORT Key audit matters (continued) Assessing the expected credit loss allowance for debt securities measured at fair value through other comprehensive income Refer to notes 20 and 33(a) to the consolidated financial statements and the accounting policies on pages 209 to 213. The Key Audit Matter How the matter was addressed in our audit At 31 December 2023, the Group’s debt securities measured at fair value through other comprehensive income amounted to HK$627 million. Expected credit losses (“ECLs”) for the debt securities of HK$260 million were recognised in the consolidated statement of profit or loss for the year ended 31 December 2023. The ECL allowance for the debt securities is measured on a 12-month or lifetime basis, depending on whether the credit risks of the debt securities have increased significantly since initial recognition. The ECL allowance for the debt securities is estimated using a model that incorporates probability of default, loss given default and exposure at default; and takes into account forward- looking information about macroeconomic factors. We identified assessing the ECL allowance for the debt securities as a key audit matter because of its significance to the consolidated financial statements and the assessment of ECL allowance involves significant management’s judgements and is subject to a high degree of inherent uncertainty. Our audit procedures to assess the ECL allowance for debt securities measured at fair value through other comprehensive income included the following: – assessing the appropriateness of management’s assessment of whether the credit risks of the debt securities have, or have not, increased significantly since initial recognition and whether any of the debt securities are credit-impaired by inspecting their overdue status, credit rating information and researching market information about issuers’ businesses; – with the assistance of our internal valuation specialist, – assessing the appropriateness of the methodology adopted by management for estimating the ECL allowance with reference to the requirements of the applicable accounting standards; and – assessing, on a sample basis, the appropriateness of the input data used by management for estimating the ECL allowance, including evaluating the exposure at default with reference to the underlying offering documents; and assessing the reasonableness of probability of default, loss given default and adjustments for forward-looking information with reference to market information. – assessing the reasonableness of the disclosures in the consolidated financial statements with reference to the requirements of the applicable accounting standards.