Annual Report 2023

NOTESTOTHE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2023 132 The United Laboratories International Holdings Limited Annual Report 2023 39. FINANCIAL INSTRUMENTS (Continued) Financial risk management objectives and policies (Continued) Credit risk and impairment assessment (Continued) Trade receivables arising from contracts with customers Trade receivables consist of a large number of customers so the concentration of credit risk is insignificant. The Group uses provision matrix to calculate ECL for trade receivables. 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. An impairment loss of RMB5,620,000 (2022: reversal of impairment loss of RMB15,470,000) is recognised during the year. Details of the quantitative disclosures are set out below in this note. Bank balances, bank and other deposits The credit risk on bank balances, bank and other deposits are limited because the counterparties are banks mostly with high credit ratings of grade A or above assigned by international credit-rating agencies. The Group assessed 12m ECL for bank balances, bank and other deposits by reference to information relating to probability of default and loss given default of the respective credit rating grades published by external credit rating agencies. Based on the average loss rates, the 12m ECL on bank balances, bank and other deposits is considered to be insignificant and therefore no loss allowance was recognised. Banker’s acceptance bills receivables and commercial bills receivables, consideration receivables and other receivables The management of the Group makes periodic individual and collective assessment on the recoverability of banker’s acceptance bills receivables and commercial bills receivables, consideration receivables and other receivables based on probability of default and loss given default of the respective credit rating grades published by external credit rating agencies, historical settlement records, past experience, and also available reasonable and supportive forward-looking information. A reversal of impairment loss of RMB655,000 and RMB6,375,000 (2022: Impairment loss of RMB848,000 and RMB6,375,000) is recognised for banker’s acceptance bills receivables and commercial bills receivables during the current year. A reversal of impairment loss of RMB552,000 (2022: reversal of impairment loss of RMB3,471,000) are recognised for other receivables. Details of the quantitative disclosures are set out below in this note.