Annual Report 2020

NOTESTOTHE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2020 77 The United Laboratories International Holdings Limited Annual Report 2020 4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued) Key sources of estimation uncertainty The followings are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Provision of ECL for trade receivables, commercial bills receivables and other receivables 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 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. At every reporting date, all available historical observed default rates are reassessed and changes in the forward-looking information are considered. The provision of ECL is sensitive to changes in estimates. The information about the ECL and the Group’s trade receivables, commercial bills receivables and other receivables are disclosed in Note 39 and Note 24, respectively. Useful lives of property, plant and equipment In applying the accounting policy on property, plant and equipment with respect to depreciation, the management estimates the useful lives of various categories of property, plant and equipment according to experience of the usage of property, plant and equipment and also by reference to the relevant industrial norm. If the actual useful lives of property, plant and equipment are less than the original estimates due to changes in the commercial and technological environment, such differences will impact the timing of the depreciation charge in profit or loss and the carrying amount of property, plant and equipment. The carrying amount of property, plant and equipment is disclosed in Note 17.