2. MATERIAL ACCOUNTING POLICY INFORMATION AND OTHER EXPLANATORY INFORMATION (CONTINUED) 2B. Judgements and sources of estimation uncertainties (Continued) Assessment of expected credit loss allowance on trade receivables: The assessment of the expected credit losses (“ECL”) requires a degree of estimation and judgement. In measuring the expected credit losses, management considers all reasonable and supportable information such as the reporting entity’s past experience at collecting receipts, any increase in the number of delayed receipts in the portfolio past the average credit period, and forward-looking information such as forecasts of future economic conditions. The carrying amounts might change materially within the next reporting year but these changes may not arise from assumptions or other sources of estimation uncertainty at the end of the reporting year. The carrying amount is disclosed in Note 18 on trade and other receivables. Measuring the fair value of unquoted equity shares measured at FVTOCI: The Group’s unquoted equity shares measured at FVTOCI are not based on quoted prices in active markets, and therefore there is material measurement uncertainty involved in this measurement of fair value. Management has determined it is necessary to use a model to value these instruments based on their structure and terms and to make any adjustments where necessary to the output of the model to reflect the assumptions that marketplace participants would use in similar circumstances. The measurement methods used and carrying amounts are disclosed in Note 20 on financial assets at FVTOCI. 3. RELATED PARTY RELATIONSHIPS AND TRANSACTIONS 3A. Related companies and related parties SFRS(I) 1-24 defines a related party as an entity or person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common or joint control with, the entity in governing the financial and operating policies, or that has an interest in the entity that gives it significant influence over the entity in financial and operating decisions. It also includes members of the key management personnel or close members of the family of any individual referred to herein and others who have the ability to control, jointly control or significantly influence or for which significant voting power in such entity resides with, directly or indirectly, any such individual. The definition includes parents, subsidiaries, fellow subsidiaries, associates, joint ventures and post-employment benefit plans, if any. There are transactions and arrangements between the Group and members of the Group and the effects of these on the basis determined between the parties are reflected in these financial statements. The current related party balances are unsecured without fixed repayment terms and interest unless stated otherwise. For any significant non-current balances and significant financial guarantees, an interest or charge is charged or imputed unless stated otherwise. Intragroup transactions and balances that have been eliminated in these consolidated financial statements are not disclosed as related party transactions and balances below. MEGACHEM LIMITED ANNUAL REPORT 2025 132 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2025
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