34. FINANCIAL INSTRUMENTS AND FINANCIAL RISKS The Group’s and the Company’s activities expose them to credit risk, market risk (including equity price risk, foreign exchange risk and interest rate risk) and liquidity risk. The Group and the Company do not hold or issue derivative financial instruments for trading purposes or to hedge against fluctuations, if any, in interest rates and foreign exchange rates. The Board of Directors is responsible for setting the objectives and underlying principles of financial risk management for the Group and the Company. The Group’s and the Company’s management then establishes the detailed policies such as risk identification and measurement, exposure limits and hedging strategies, in accordance with the objectives and underlying principles approved by the Board of Directors. There has been no change to the Group’s and the Company’s exposures to these financial risks or the manner in which it manages and measures the risk. Credit risk Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in a loss to the Group. The Group’s major classes of financial assets are trade and other receivables, contract assets, financial assets at FVTOCI and cash and bank balances. The Group has adopted a policy of only bidding for contracts from developers with good financial standings. The Group performs ongoing credit evaluation of its counterparties’ financial condition and generally does not require collaterals. As the Group and the Company do not hold any collateral, the maximum exposure to credit risk for each class of financial instruments is the carrying amount of that class of financial instruments presented on the statements of financial position, except as follows: Group Company 2025 2024 2025 2024 $’000 $’000 $’000 $’000 Committed corporate guarantees provided to banks for subsidiaries’ and associate’s banking facilities as at the end of reporting period 65,984 151,894 853 1,268 The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics except as follows: a) At the end of the reporting period, the Group has outstanding trade receivables from 4 (2024: 5) customers which represent 83% (2024: 93%) of total trade receivables balance. b) At the end of the reporting period, the retention sum from 1 (2024: 1) customers represent 100% (2024: 100%) of total retention sum receivables. The Group defines counterparties as having similar characteristics if they are related entities. Ongoing evaluation is performed on the financial condition of accounts receivable. Trade receivables and contract assets Expected credit loss model is initially based on the Group’s and the Company’s historical observed default rates. The Group and the Company will calibrate the model to adjust historical credit loss experience with industry future outlook. At each reporting period, historical default rates are updated and change in the industry future outlook is reassessed. The Group and the Company also evaluate expected credit loss on credit-impaired receivables separately at each reporting period. The expected credit loss computed is derived from historical data and credit assessment includes forward-looking information which management view is representative of the customers’ credit situation at the reporting date. ANNUAL REPORT 2025 KEONG HONG HOLDINGS LIMITED 119 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2025
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