Annual Report 2021

NOTESTOTHE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 81 The United Laboratories International Holdings Limited Annual Report 2021 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, consideration receivables and commercial bills receivables The Group estimates the ECL on trade receivables using a provision matrix, and performs individual assessment on commercial bills receivables and consideration receivables. During the years ended 31 December 2021 and 2020, the loss rates for the trade receivables are estimated based on historical credit loss experience, adjusted for forward-looking factors specific to the debtor’s industry and the macro economic environment. During the year ended 31 December 2021, the loss rate for the consideration receivables is estimated based on the recoverable amount of the underlying assets, the potential transaction cost of recovering the consideration receivables as well as the financial position and credit risk of the debtor, whereas the loss rates for the consideration receivables and commercial bills receivables are 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 during the year ended 31 December 2020. 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 consideration receivables are disclosed in Note 38 and Note 23, respectively. Useful lives of property, plant and equipment and intangible assets In applying the accounting policy on property, plant and equipment and intangible assets with respect to depreciation and amortisation, the management estimates the useful lives of various categories of property, plant and equipment and intangible assets according to experience of the usage of property, plant and equipment and intangible assets and also by reference to the relevant industrial norm. If the actual useful lives of property, plant and equipment and intangible assets are less than the original estimates due to changes in the commercial and technological environment, such differences will impact the timing of the depreciation and amortisation charge in profit or loss and the carrying amount of property, plant and equipment and intangible assets. The carrying amount of property, plant and equipment and intangible assets is disclosed in Notes 17 and 20, respectively.