148 MEGACHEM LIMITED Notes to The Financial Statements 31 December 2024 29. Financial instruments: information on financial risks and other explanatory information (cont’d) 29D. Credit risk on financial assets Financial assets subject to concentrations of credit risk and failures by counterparties to discharge their obligations in full or in a timely manner arise principally from cash balances with banks, receivables and other financial assets. The general approach in the Singapore Financial Reporting Standards (International) on financial instruments is applied to measure expected credit losses (“ECL”) allowance on financial assets. On initial recognition, a day-1 loss is recorded equal to the 12 month ECL unless the assets are considered credit impaired. The ECL allowance for debt assets is recognised at an amount equal to the lifetime ECL if the credit risk on that financial instrument has increased significantly since initial recognition. However, for trade receivables that do not contain a material financing component or when the Group applies the practical expedient of not adjusting the effect of a material financing component, the simplified approach in calculating ECL is applied. Under the simplified approach, the loss allowance is recognised at an amount equal to lifetime ECL at each reporting date using historical loss rates for the respective risk categories and incorporating forward-looking estimates. Lifetime ECL may be estimated individually or collectively. For the credit risk on the financial assets an ongoing credit evaluation is performed on the financial condition of the debtors and any loss is recognised in profit or loss. Reviews and assessments of credit exposures in excess of designated limits are made. Renewals and reviews of credits limits are subject to the same review process. Note 22 discloses the cash balances. There was no identified impairment loss. As the Group and Company do not hold any collateral, the maximum exposure to credit risk for each class of financial instruments is the carrying amount of that class of financial instruments presented on the statement of financial position except for corporate guarantees provided to banks (Note 30). 29E. Liquidity risk – financial liabilities maturity analysis Liquidity risk refers to the difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. It is expected that all the liabilities will be settled at their contractual maturity. The average credit year taken to settle trade payables is about 60 days (2023: 60 days). The classification of the financial assets is shown in the statement of financial position as they may be available to meet liquidity needs and no further analysis is deemed necessary. The following table analyses the Group’s and the Company’s non-derivative financial liabilities by remaining contractual maturity (contractual and undiscounted cash flows). Group Less than 1 year More than 1 year but less than 5 years Over 5 years Total $’000 $’000 $’000 $’000 2024: Trade and other payables 14,734 – – 14,734 Gross borrowing commitments 25,412 – – 25,412 Gross lease liabilities 517 1,217 3,429 5,163 40,663 1,217 3,429 45,309 2023: Trade and other payables 15,092 – – 15,092 Gross borrowing commitments 28,288 420 – 28,708 Gross lease liabilities 400 1,075 3,570 5,045 43,780 1,495 3,570 48,845
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