106
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1
SIGNIFICANT ACCOUNTING POLICIES (Continued)
(i)
Credit losses and impairment of assets (Continued)
(ii)
Credit losses from financial guarantees issued (Continued)
(A)
Policy applicable from 1 January 2018
The Group monitors the risk that the specified debtor will default on the contract and recognises a provision when ECLs on the financial guarantees are determined to be higher than the amount carried in "trade and other payables” in respect of the guarantees (i.e. the amount initially recognised, less accumulated amortisation).
To determine ECLs, the Group considers changes in the risk of default of the specified debtor since the issuance of the guarantee. A 12-month ECL is measured unless the risk that the specified debtor will default has increased significantly since the guarantee is issued, in which
case a lifetime ECL is measured. The same definition of default and the same assessment of
significant increase in credit risk as described in note 1(j)(i) apply.
As the Group is required to make payments only in the event of a default by the specified debtor in accordance with the terms of the instrument that is guaranteed, an ECL is estimated based on the expected payments to reimburse the holder for a credit loss that it incurs less any amount that the Group expects to receive from the holder of the guarantee, the specified debtor or any other party. The amount is then discounted using the current risk-free rate adjusted for risks specific to the cash flows.
(B)
Policy applicable prior to 1 January 2018
(iii)
Prior to 1 January 2018, a provision would be recognised if and when it became probable that (i) the holder of the guarantee would call upon the Group under the guarantee and (ii) the amount of the claim on the Group was expected to exceed the amount carried in "trade and other payables" in respect of the guarantee.
Impairment of other assets
Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be impaired or an impairment loss previously recognised no longer exists or may have decreased:
other property, plant and equipment; and
investments in subsidiaries in the Company's statement of financial position, associates and a joint venture in the consolidated and Company's statement of financial position.
If any such indication exists, the asset's recoverable amount is estimated.
Hong Kong Ferry (Holdings) Company Limited Annual Report 2018