NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2022 (CURRENCY - SINGAPORE DOLLARS UNLESS OTHERWISE STATED) C14 Financial risk management objectives and policies (continued) Liquidity risk (continued) Recognition and measurement Financial guarantees are financial instruments issued by the Group to joint ventures that require the issuer to make specified payments to reimburse the holder for the loss it incurs because a specified debtor fails to meet payment when due in accordance with the original or modified terms of a debt instrument. Financial guarantees are recognised initially at fair value and are classified as financial liabilities. Subsequently, they are measured at the higher of the loss allowance determined in accordance with SFRS(I) 9 and the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of SFRS(I) 15. ECLs are a probability-weighted estimate of credit losses. ECLs are measured for financial guarantees issued as the expected payments to reimburse the holder less any amounts that the Group expects to recover. Credit risk Credit risk is managed through the application of credit approvals, credit limits and monitoring procedures. Where appropriate, the Company or its subsidiaries obtain collaterals from customers or arrange master netting agreements. Cash terms, advance payments, and letters of credit or bank guarantees are required for customers of lower credit standing. The carrying amounts of financial assets and contract assets represent the Group’s maximum exposures to credit risk, before taking into account any collateral held. Group 2022 $’000 2021 $’000 Investments 76,704 36,129 Derivative financial instruments 50,359 31,389 Contract assets 2,099,676 1,726,505 Trade receivables 1,163,491 1,068,290 Amounts due from related parties 170,089 125,452 Advances and other receivables 147,577 164,144 Bank balances and other liquid funds 601,771 815,924 4,309,667 3,967,833 (Reversal of impairment)/impairment losses on financial assets and contract assets recognised in profit or loss are as follows: Group 2022 $’000 2021 $’000 Trade receivables (5,646) 9,863 Contract balances arising from contracts with customers 1,716 19,965 (3,930) 29,828 192 ST ENGINEERING ANNUAL REPORT 2022
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