Annual Report 2020

NOTESTOTHE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2020 133 The United Laboratories International Holdings Limited Annual Report 2020 39. FINANCIAL INSTRUMENTS (Continued) Financial risk management objectives and policies (Continued) Credit risk and impairment assessment (Continued) The credit risk on bank balances, pledged bank deposits and bills receivables are limited because the counterparties are banks mostly with high credit ratings of grade A or above assigned by international credit-rating agencies. Other than concentration of credit risk on liquid funds which are deposited with several banks with high credit ratings, the Group does not have any other significant concentration of credit risk. Trade receivables consist of a large number of customers. To manage the risk arising from other receivables and other pledged deposits, the Group only transacts with reputable parties that have no default history and have a strong capacity to meet its contractual cash flow obligations in the near term. The credit risk on other pledged deposits are limited because the counterparties are financial institutions with high external credit ratings of grade A or above. The management has concluded that the ECL for other pledged deposits are not significant. The Group estimates the ECL on trade receivables using a provision matrix, and performs individual assessment on commercial bills receivables and consideration receivables. The loss rates are estimated based on historical credit loss experience or with reference to the data from the external credit rating agency, adjusted for forward-looking factors specific to the debtor’s industry and the macro economic environment. For the purposes of ECL assessment on the remaining other receivables, the management of the Group makes periodic individual and collective assessment on the recoverability of other receivables and refundable deposits based on historical settlement records, past experience, and also available reasonable and supportive forward-looking information. The gross carrying amounts of commercial bills receivables, consideration receivables and other receivables that are assessed individually and collectively are RMB244,110,000, RMB308,388,000, RMB37,900,000 and RMB63,826,000 at 31 December 2020 respectively (2019: nil, RMB773,693,000, nil and RMB29,739,000). During the year ended 31 December 2020, an impairment loss, net of reversal of RMB35,390,000, RMB31,326,000, RMB1,036,000 and RMB1,630,000 has been recognised (2019: nil, RMB13,383,000, nil and reversal of RMB3,377,000) in connection with commercial bills receivables, consideration receivables and other receivables that are assessed individually and collectively, respectively.