Annual Report 2023

INDEPENDENT AUDITOR’S REPORT 36 The United Laboratories International Holdings Limited Annual Report 2023 KEY AUDIT MATTER (Continued) Key audit matter How our audit addressed the key audit matter Impairment assessment of trade receivables We identified the impairment assessment of the trade receivables as a key audit matter as the assessment of expected credit loss (“ECL”) involved high level of estimation uncertainty. The Group estimates the ECL on trade receivables using a provision matrix. The loss rates are estimated based on historical credit loss experience adjusted for forward-looking factors specific to the debtor’s industry and the macroeconomic environment. At 31 December 2023, the net carr ying value o f t he t r ade r ece i vab l es was app r ox ima t e l y RMB2,366,179,000, with allowance for credit losses of approximately RMB12,459,000. Details relating to the Group’s trade receivables and the ECL assessment are set out in Notes 24 and 39 to the consolidated financial statements, respectively. Our audit procedures in relation to the valuation of the trade receivables included: • Obtaining an understanding of the process relating to the allowance for credit losses of trade receivables; • Evaluating the reasonableness of the key judgments and assumptions relating to calculation of historical default rates and forward-looking factor made in the ECL model; • Evaluating the completeness, accuracy and relevance of data used in the ECL model and checking the arithmetic accuracy of the calculations; • Obt aining the full aging report of trade receivables and testing the accuracy by checking the aging of selected invoices and instalment schedule on a sample basis; and • Reviewing the presentation and disclosure of the trade receivables for compliance with relevant HKFRSs.