Fraser & Neave Holdings Bhd Annual Report 2021

30. FINANCIAL INSTRUMENTS #CONTINUED$ #D$ CREDIT RISK #CONTINUED$ Trade receivables (continued) Exposure to credit risk, credit quality and collateral As at the end of the financial year, the maximum exposure to credit risk arising from trade receivables is represented by the carrying amounts in the statement of financial position. The Group receives financial guarantees given by banks, shareholders or directors of customers in managing exposure to credit risks. At the end of the financial year, financial guarantees received by the Group amounted to RM141,383,000 (2020: RM161,333,000) in respect of RM415,392,000 (2020: RM443,541,000) trade receivables. The remaining balance of trade receivables are not secured by any collateral or supported by any other credit enhancements. Recognition and measurement of impairment losses In managing credit risk of trade receivables, the Group manages its debtors and takes appropriate actions (including but not limited to legal actions) to recover long overdue balances. Generally, trade receivables will pay within 30 days. The Group’s debt recovery process is as follows: a) Above 30 days past due after credit term, the Group will start to initiate a structured debt recovery process which is monitored by the credit management team; and b) Above 90 days past due, the Group will commence a legal proceeding against the customer. The Group uses an allowance matrix to measure ECLs of trade receivables for all segments. Consistent with the debt recovery process, invoices which are past due 90 days will be considered as credit impaired. Loss rates are calculated using a ‘roll rate’ method based on the probability of a receivable progressing through successive stages of delinquency to 90 days past due. Loss rates are based on actual credit loss experience over the past three years. The Group also considers di!erences between (a) economic conditions during the period over which the historic data has been collected, (b) current conditions and (c) the Group’s view of economic conditions over the expected lives of the receivables. Financial Statements 233 Fraser & Neave Holdings Bhd ! Annual Report 2021