Annual Report 2025 185 Notes to the Financial Statements 31 December 2025 (c) Credit risk Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in a loss to the Group. The Group’s exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including investment securities and cash), the Group minimises credit risk by dealing exclusively with high credit rating counterparties. The Group’s major classes of financial assets are cash and fixed deposits, finance lease receivables, trade and other receivables and derivative assets. For trade receivables, the Group adopts the policy of dealing only with customers of appropriate credit history and obtaining sufficient security where appropriate to mitigate credit risk. For other receivables, the Group deals only with high credit quality counterparties. Cash and fixed deposits are placed with financial institutions which are regulated. Transactions involving derivative financial instruments are entered into only with counterparties that are of acceptable credit quality. The Manager has an established process to evaluate the creditworthiness of its tenants and prospective tenants to minimise potential credit risk. Security in the form of bankers’ guarantees, insurance bonds or cash security deposits are obtained upon the commencement of the lease. As at the reporting date, there are no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying value of each financial asset, including derivative financial instruments on the Statements of Financial Position. (i) Trade receivables For all trade receivables, the Group provides for lifetime expected credit losses using a provision matrix, estimated based on historical credit loss experience based on the past due status of the debtors and payment records, adjusted as appropriate to reflect current conditions and estimates of future economic conditions. The Group’s and the Trust’s credit risk for net trade receivables based on the information provided to key management personnel is disclosed in Note 10. (ii) Loans to subsidiaries The Trust held loans to its subsidiaries of $834,072,000 (2024 : $525,423,000) which are amounts lent to subsidiaries to satisfy both short term and long term funding requirements. Based on an assessment of qualitative and quantitative factors that are indicative of the risk of default (including but not limited to audited financial statements, management accounts and cash flow projections, and applying experienced credit judgement), these exposures are considered to have low credit risk. Therefore, impairment on these balances has been measured on the 12 months expected credit loss basis, and the amount of the allowance is not significant. (iii) Derivatives financial instruments Derivatives financial instruments are entered into with financial institution counterparties that are regulated. (iv) Cash and fixed deposits Cash and fixed deposits are placed with financial institutions that are regulated. The Group limits its credit risk exposure in respect of investments by only investing in liquid securities and only with counterparties that have sound credit ratings, and thus management does not expect any counterparty to fail to meet its obligations. Other than the above, the Group and the Trust had no other financial assets which it had determined to be impaired and there are no allowances on impairment provided for as at 31 December 2025 and 31 December 2024. 28. Financial Risk Management (continued)
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