Annual Report 2021

NOTESTOTHE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 140 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: (Continued) (3) During the year ended 31 December 2021, commercial bills receivable of RMB213,905,000 has been received. As a result, RMB30,205,000 out of the allowance for credit losses of RMB35,390,000 has been written off and the remaining RMB5,185,000 has been reversed. During the year ended 31 December 2020, after the assessment, credit risk of the consideration receivables and commercial bills receivables has been increased significantly since initial recognition. Having considered various factors, including but not limited to the financial position of Evergrande Chengdu and the yield rate of the bonds issued by Evergrande Chengdu or its holding company, the Group transferred the 12m ECL of RMB8,821,000 to lifetime ECL and further provided ECL allowance of RMB71,278,000, after the reversal of ECL of RMB7,596,000 due to the settlement during the year ended 31 December 2020. At 31 December 2020, the management of the Group considered that the ECL of consideration receivables and commercial bills receivables are sufficient. (4) As at 31 December 2021, principal amount of RMB171,500,000 has been due but not yet received by the Group. Based on the legal opinion from the PRC lawyer, who is independent and not connected to the Group, the Group can initiate a litigation against Evergrande Chengdu to recover the consideration receivables, after considering various factors, including but not limited to the recoverable amount of the underlying assets, potential transaction cost of recovering the consideration receivables as well as the financial position and the credit risk of Evergrande Chengdu, the management considers that there is evidence that the consideration receivables is credit-impaired, and the Group transferred the lifetime ECL (not credit-impaired) of RMB44,709,000 to lifetime ECL (credit- impaired) and further provided ECL allowance of RMB294,865,000 during the year ended 31 December 2021. During the current year, an impairment loss of RMB22,309,000 (2020: RMB19,697,000) has been recognised and amount of RMB19,697,000 (2020: RMB23,167,000) has been reversed for trade receivables, based on the provision matrix.