Notes to the Financial Statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) (d) Impairment of financial assets The Group and the Company assess on a forward-looking basis the expected credit loss (“ECL”) on financial assets at the end of each reporting period. The loss allowance for financial assets is determined using the ECL model which includes assumptions on forward-looking information and their associated impact on probability of default, loss given default and exposure at default. Management uses judgement in making these assumptions and selecting the inputs to the loss allowance calculation, based on the Group’s and the Company’s past history, existing market conditions as well as forward-looking estimates at the end of each reporting period. By varying the assumptions of the ECL model, multiple scenarios (a range of possible outcomes) were factored into the computation of the ECL model and the probabilities of occurrence were assigned to each scenario to arrive at a single loss allowance. The assumptions used in the multiple scenarios and the probabilities of occurrence assigned required management’s judgement. (e) Revenue recognised from customers on contracts Revenue is recognised when or as the control of the asset is transferred to the customers and, depending on the terms of the contract and the applicable laws governing the contract, control of the asset may transfer over time or at a point in time. If control of the asset transfers over time, revenue is recognised over the period of the contract by reference to the progress, based on the extent of contract costs incurred. Significant judgement is required in the estimation of the progress towards complete satisfaction of a performance obligation based on the extent of contract costs incurred over the estimated budget cost and the recoverability of the construction contracts. The estimated contract costs to completion is based on estimated and approved budgets, which require assessment and judgements to be made on changes in, for example, work scope, costs and costs to completion. In making these judgements, management relies on past experience. (f) Deferred tax assets Deferred tax assets are recognised for all unused tax losses, unabsorbed capital allowances and other deductible temporary differences to the extent that it is probable that taxable profit will be available against which the tax losses, capital allowances and other deductible temporary differences can be utilised. Significant judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits. Assumptions about generation of future taxable profits depend on the Group’s estimate of projected future cash flows. These judgements and assumptions are subject to risks and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets recognised in the statements of financial position and the amount of unused tax losses, unabsorbed capital allowances and unutilised temporary differences that remain unrecognised. Deferred tax assets is disclosed in Note 8. Integrated Annual Report 2023 192
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