26. FINANCIAL RISK MANAGEMENT (continued) Financial risk factors (continued) (b) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The major classes of financial assets of the Group and ECW are cash and bank balances and trade and other receivables. Cash and bank balances are placed with reputable financial institutions which are regulated and are subject to immaterial credit loss. For certain trade and other receivables, the Group adopts the policy of dealing only with customers of appropriate credit standing and history. For other financial assets, the Group adopts the policy of dealing only with high credit quality counterparties. 94% (2023: 87%) of trade and other receivables are due from the Sponsor Group and secured with the security deposits placed with the Group. Refer to Note 11(a) for the Manager’s assessment of the credit risk. The maximum exposure to credit risk to each class of financial instruments is the carrying amount of that class of financial instruments presented on the statement of financial position, except for trade and other receivables that are secured with security deposits. Trade receivables In measuring the expected credit losses, trade receivables are grouped based on shared credit risk characteristics and days past due. In calculating the expected credit loss rates, the Group considers the security deposits held, historical loss rates for each category of customers and adjusts to reflect current and forward-looking macroeconomic factors affecting the ability of the customers to settle the receivables. Where receivables are provided for, the company continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognised in profit or loss. During current financial year, there were no write-back for doubtful receivables (2023: Nil) due to subsequent collections. The movement in allowance for impairment of other receivables (non-related parties) is as follows: Group 2024 2023 S$’000 S$’000 Beginning of the year 1,145 1,191 Allowance Made 1,823 – Currency translation differences 14 (46) End of the year 2,982 1,145 Impaired receivables (net of security deposits) are written off for when there is no reasonable expectation of recovery, such as a debtor failing to respond to demand letter. EC WORLD REIT 116 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024
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