NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2021 3. SIGNIFICANT ACCOUNTING JUDGEMENT AND ESTIMATES (continued) Estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at 31 December 2021, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. Impairment of goodwill The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating units and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of goodwill at 31 December 2021 was US$542,636,000 (2020: US$340,243,000). Further details are given in note 19. Provision for expected credit losses on trade receivables, other receivables and contract assets The Group uses a provision matrix to calculate ECLs for trade receivables, other receivables and contract assets. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns (i.e., by customer type and rating and other forms of credit insurance). The provision matrix is initially based on the Group’s historical observed default rates. The Group will calibrate the matrix to adjust the historical credit loss experience with forward-looking information. The assessment of the correlation among historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and forecast economic conditions. The Group’s historical credit loss experience and forecast of economic conditions may also not be representative of customers’ actual default in the future. The information about the ECLs on the Group’s trade receivables, other receivables and contract assets is disclosed in notes 22 and 23 to the financial statements, respectively. Fair value of investment properties held either directly or through joint ventures, associate and financial assets at fair value through profit or loss In the absence of current prices in an active market for similar properties, the Group considers information from a variety of sources, including: (1) current prices in an active market for properties of a different nature, condition or location or subject to different lease or other contracts, adjusted to reflect those differences; (2) recent prices of similar properties on less active markets, with adjustments to reflect any changes in economic conditions since the dates of the transactions that occurred at those prices; and (3) discounted cash flow projections based on reliable estimates of future cash flows, supported by the terms of any existing lease and other contracts and (when possible) by external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows. Further details, including the key assumptions used for fair value measurement and a sensitivity analysis, are given in notes 18 and 45 to the financial statements. R E A C H I N G N E W H E I G H T S 166
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