Annual Report 2021

NOTESTOTHE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 139 The United Laboratories International Holdings Limited Annual Report 2021 38. FINANCIAL INSTRUMENTS (Continued) Financial risk management objectives and policies (Continued) Credit risk and impairment assessment (Continued) Notes: (1) For the purposes of internal credit risk management, the Group uses repayment history or other relevant information to assess whether credit risk has increased significantly since initial recognition. At 31 December 2021, the balances of other receivables and deposits are not past due and based on the historical default rates of these balances are considered as low risk. (2) For trade receivables, the Group has applied the simplified approach in HKFRS 9 to measure the loss allowance at lifetime ECL. The Group uses provision matrix to calculate ECL for trade receivables. The provision rates are based on internal credit risk as groupings of various debtors that have similar loss patterns. The provision matrix is based on the Group’s historical default rates taking into consideration forward-looking information that is reasonable and supportable available without undue costs or effort. At every reporting date, the historical observed default rates are reassessed and changes in the forward-looking information are considered. The following ECL rates are about the exposure to credit risk for trade receivables which are assessed based on provision matrix taking into account the weighted average rate of various categories’ debtors at 31 December 2021 and 2020 within lifetime ECL (not credit-impaired). 2021 2020 Average Gross carrying Allowance Average Gross carrying Allowance loss rate amount amount loss rate amount amount RMB’000 RMB’000 RMB’000 RMB’000 Low risk 0.06% 617,471 391 0.09% 567,041 503 Normal risk 0.87% 767,947 6,664 0.94% 672,495 6,349 High risk 6.39% 238,780 15,254 7.10% 180,914 12,845 1,624,198 22,309 1,420,450 19,697