NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2024 (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. Expected credit loss (ECL) is 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 2024 2023 $’000 $’000 Investments 63,006 63,075 Derivative financial instruments 19,992 65,684 Contract assets 2,567,423 2,240,100 Trade receivables 1,497,769 1,592,575 Amounts due from related parties 126,875 96,183 Advances and other receivables 98,600 144,771 Bank balances and other liquid funds 430,642 353,337 4,804,307 4,555,725 (Reversal of impairment losses)/impairment losses on financial assets and contract assets recognised in profit or loss are as follows: Group 2024 2023 $’000 $’000 Trade receivables (76) 3,615 Contract balances arising from contracts with customers (6,789) (673) (6,865) 2,942 188 ST ENGINEERING | ANNUAL REPORT 2024
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