FINANCIAL STATEMENTS (continued) 101 15. TRADE AND OTHER RECEIVABLES (continued) (e) Credit risk and impairment policy for trade receivables As at the end of the reporting period, the maximum credit risk exposure is equivalent to the gross carrying amount of trade receivables of the Group. As at 31 August 2022, the Group has significant concentration of credit risk in the form of outstanding balances from 5 trade customers, which amounted to RM8,513,000 (2021: RM6,636,000) representing 23% (2021: 17%) of gross trade receivables. The Directors are of the opinion that the outstanding balances from these customers are fully recoverable based on the following: i) Significant payments have been subsequently received from 5 customers after the reporting period; and ii) The Directors have made assessments that all these customers have the ability to repay the balances outstanding. The Group has also entered into small number of contracts, all of which are monitored individually for completion and payment. The management is 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. 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 gross carrying amounts of credit impaired trade receivables are written off (either partially or fully) when there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. Nevertheless, trade receivables that are written off could still be subject to enforcement activities. The Group uses an allowance matrix to measure the lifetime ECL of trade receivables based on the simplified approach. Consistent with the debt recovery process, invoices which are past due 690 days will be considered as credit impaired. Expected loss rates are calculated using the ‘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 the differences between (a) economic conditions during the period over which the historical data has been collected, (b) current economic conditions and (c) the Group’s view of economic conditions over the expected lives of the receivables. The Group adjusted the loss rates to reflect current and forwardlooking information such as gross domestic product, unemployment rate, inflation rate, bank lending rate, non-performing loan ratio and services sector gross domestic product. Significant judgement is required in determining the probabilities of default by receivables and appropriate forward-looking information in assessing the expected credit loss allowance. 101 ANNUAL REPORT 2022
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