Annual Report 2023

264 2023 Annual Report Transport International Holdings Limited NOTES TO THE FINANCIAL STATEMENTS (Expressed in Hong Kong dollars unless otherwise indicated) 33 Financial risk management and fair values of financial instruments Exposure to credit, liquidity, interest rate, currency and fuel price risks arises in the normal course of the Group’s business. 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 and other receivables and investments in financial assets measured at FVOCI (recycling). In respect of trade and other receivables, credit evaluations are performed on all major customers requiring credit over a certain amount. These evaluations focus on the customers’ past history of making payments when due and their 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. A credit period of between 30 days and 90 days is normally granted to customers of the Group’s non- franchised transport operations and media sales business. All the trade and other receivables included in current assets are expected to be recoverable within one year. Due to the financial strength of these customers and the short duration of the trade and other receivables, the ECL allowance is considered insignificant. The Group’s exposure to credit risk arising from bank deposits and cash is limited because the counterparties are banks, which the Group considers to have low credit risk. The Group measures expected credit loss allowance for investments in financial assets measured at FVOCI (recycling) at an amount equal to 12-month ECLs unless there has been a significant increase in credit risk since initial recognition, in which case the loss allowance is measured at an amount equal to lifetime ECLs. Key assumptions used for expected credit loss allowance calculations are probability of default which ranges from 0.1% to 100% (2022: 0.01% to 100%) and loss given default which ranges from 25.2% to 62.3% (2022: 18.9% to 43.6%). Movement in the expected credit loss allowance account in respect of investments in financial assets measured at FVOCI (recycling) during the year is as follows: 12-month ECL Lifetime ECLs Total $’000 $’000 $’000 At 1 January 2022 – – – Expected credit loss recognised during the year 2,200 89,800 92,000 At 31 December 2022 and 1 January 2023 2,200 89,800 92,000 Expected credit loss recognised during the year – 260,000 260,000 At 31 December 2023 2,200 349,800 352,000 The maximum exposure to credit risk of financial assets measured at FVOCI amounted to $870 million (2022: $1,144 million). Regular review and follow up actions are carried out on overdue amounts to minimise the Group’s exposure to credit risk. An ageing analysis of the receivables is prepared on a regular basis and is closely monitored to minimise any credit risk associated with these receivables.