Sasbadi Annual Report 2020

127 ANNUAL REPORT 2020 FINANCIAL STATEMENTS (continued) 26. Financial instruments (continued) 26.4 Credit risk (continued) Receivables (continued) Exposure to credit risk, credit quality and collateral As at the end of the reporting period, the maximum exposure to credit risk arising from receivables is represented by the carrying amounts in the statements of financial position. As at 31 August 2020, the Group has significant concentration of credit risk in the form of outstanding balances from 5 trade customers which amounted to RM8,500,000 (2019: RM10,718,000) representing 18% (2019: 21%) of gross trade receivables. The Directors are of the opinion that the outstanding balances from these customers are fully recoverable based on the following: x Significant payments have subsequently been received from 5 customers after the reporting period; and x The Directors have made assessments that all these customers have the ability to repay the balances outstanding. The Group has entered into a small number of contracts, all of which are monitored individually for completion and payment by the Directors and management. The Directors are confident that, based on their knowledge of payment patterns and subsequent payments received, the Group is able to fully recover the amounts due from its customers. Where applicable, the Group will demand for guarantees from shareholders/ Directors of their customers as a form of safeguard over the outstanding debts. Recognition and measurement of impairment loss In managing credit risk of trade receivables, the Group manages its debtors and takes appropriate actions (including but not limited to legal actions) to recover long overdue balances. Any receivables having significant balances past due more than 330 days, which are deemed to have higher credit risk, are monitored individually. The Group uses an allowance matrix to measure ECLs of trade receivables. Consistent with the debt recovery process, invoices which are past due 690 days will be considered as credit impaired. Loss rates are calculated using a ‘roll rate’ method based on the probability of a receivable progressing through successive stages of delinquency to 690 days past due. Loss rates are based on actual credit loss experience over the past three years. The Group also considers differences between (a) economic conditions during the period over which the historic data has been collected, (b) current conditions and (c) the Group’s view of economic conditions over the expected lives of the receivables. Nevertheless, the Group believes that these factors are immaterial for the purpose of impairment calculation for the year.