ST Engineering Annual Report 2020

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2020 (CURRENCY – SINGAPORE DOLLARS UNLESS OTHERWISE STATED) C14 Financial risk management objectives and policies (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 2020 2019 $’000 $’000 Investments 23,138 16,782 Derivative financial instruments 44,461 19,386 Contract assets 1,153,192 1,246,207 Trade receivables 1,049,368 1,247,549 Amounts due from related parties 54,852 40,467 Advances and other receivables 146,400 122,294 Bank balances and other liquids funds 730,624 453,230 3,202,035 3,145,915 Impairment losses on financial assets and contract assets recognised in profit or loss are as follows: Group 2020 2019 $’000 $’000 Trade receivables 22,319 50,750 Contract balances arising from contracts with customers 4,367 2,723 26,686 53,473 20 7 ANNUAL REPORT 2 0 2 0 / CORPORATE OVERVI EW PERFORMANCE REVI EW SUSTAINABI L ITY CORPORATE GOVERNANCE F INANCIAL REPORT