Notes to the Financial Statements For the financial year ended 31 December 2024 32 FINANCIAL RISK MANAGEMENT (continued) (b) Market risk (continued) (ii) Foreign currency risk (continued) Sensitivity analysis It is estimated that a five-percentage point strengthening in foreign currencies against the respective functional currencies of the Group would increase the Group’s profit before tax by approximately $13 million (2023: $29 million). A five-percentage point weakening in foreign currencies against the Singapore Dollars would have an equal but opposite effect. The Group’s outstanding forward exchange contracts and cross currency swaps have been included in this calculation. The analysis assumed that all other variables, in particular interest rates, remain constant and does not take into account the translation related risk, associated tax effects and share of non-controlling interests. (c) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. For trade and other receivables and other financial assets at amortised cost, the Group has guidelines governing the process of granting credit as a service or product provider in its respective segments of business. Trade and other receivables relate mainly to the Group’s tenants from its office buildings, shopping malls, business parks and lodging properties, as well as receivables from the Group’s fee income-related business. Financial assets at amortised cost relate mainly to amounts owing by related parties. Investments and financial transactions are restricted to counterparties that meet the appropriate credit criteria. The principal risk to which the Group is exposed to in respect of financial guarantee contracts is credit risk in connection with the guarantee contracts they have issued. To mitigate the risk, management continually monitors the risk and has established processes including performing credit evaluations of the parties it is providing the guarantee on behalf of. Guarantees are only given for the benefit of its subsidiaries and related parties. The maximum exposure to credit risk in respect of these financial guarantees at the reporting date is disclosed in note 34. The Group has a diversified portfolio of businesses and as at reporting date, there was no significant concentration of credit risk with any entity. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet, including derivative financial instruments as well as any irrevocable loan undertaking to associates and joint venture. (i) Trade receivables and contract assets The Group reviews the customers’ credit risk taking into account the ageing of the outstanding receivables, amount of security deposit available as well as any indication of credit default, and assess the amount of specific allowance for doubtful receivables required for each customer. The Group also uses a provision matrix to measure the lifetime expected credit loss allowance for trade receivables and contract assets. In measuring the expected credit losses, trade receivables and contract assets are grouped based on similar credit risk characteristics and days past due. When determining the expected credit loss rates, the Group considers historical loss rates for customer grouped by industry sector and forward-looking macroeconomic factors like country’s gross domestic product (GDP), which affect the ability of the customers to settle the receivables. Trade and other receivables and contract assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the Group. Where receivables are written off, the Group continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognised in profit or loss. 174 CapitaLand Investment Limited Notes to the Financial Statements For the financial year ended 31 December 2024 32 FINANCIAL RISK MANAGEMENT (continued) (c) Credit risk (continued) (ii) Other financial assets at amortised cost The Group assesses on a forward-looking basis the expected credit losses associated with financial assets at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. (a) The movements in credit loss allowance are as follows: Trade receivables Other receivables Amounts due from joint ventures (current) Amounts due from joint ventures (noncurrent) $’M $’M $’M $’M The Group Note 8(b) Note 8(a) At 1 January 2024 39 16 28 13 Allowance utilised (10) * – – Allowance during the year 7 2 1 – Reversal of allowance during the year (3) (*) (3) – Disposal of subsidiary (4) – – – Translation differences (1) (*) (*) * At 31 December 2024 28 18 26 13 At 1 January 2023 51 16 28 13 Allowance utilised (6) – – – Allowance during the year 4 * 1 – Reversal of allowance during the year (10) (*) – – Translation differences (*) * (1) (*) At 31 December 2023 39 16 28 13 * Less than $1 million The movements in allowance for impairment loss on receivables due from subsidiaries (note 12) were as follows: Allowance for impairment loss on receivables 2024 2023 $’M $’M The Company At 1 January and 31 December 16 16 Cash and cash equivalents are subject to immaterial credit loss. 175 Annual Report 2024
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