The American Club 2021/2022 Annual Report

PAGE 74 THE AMERICAN CLUB SINGAPORE ANNUAL REPORT 2021 / 2022

NOTES TO FINANCIAL STATEMENTS 30 JUNE 2022

4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL MANAGEMENT (cont’d)

(ii) Interest rate risk The main source of interest rate risk is the interest-bearing fixed deposit. The Club’s policy is to obtain favourable interest rates that are available. Interest rate from interest income for the financial year is between 0.06% to 0.66% (2021 : 0.05% to 0.41%) per annum. No sensitivity analysis is prepared as the Club does not expect any material effect on the Club’s profit and loss arising from the effects of reasonably possible changes to interest rates on interest bearing financial instruments at the end of the reporting period. (iii) Credit risk management Credit risk refers to the risk that members will default on their contractual obligations resulting in financial loss to the Club. The Club has adopted procedures in monitoring collections from members and in monitoring default of payments from members. The Club places its cash and investments with creditworthy financial institutions. The Club develops and maintains its credit risk grading to categorise exposures according to their degree of risk of default. The Club uses its own trading records to rate its major customers and other receivables.

Category

Description

Basis for recognising expected credit losses (ECL)

Performing

The counterparty has a low risk of default and does not have any past-due amounts.

12-month ECL

Doubtful

Amount is > 90 days past due or there has been a significant increase in credit risk since initial recognition. Amount is > 180 days past due or there is evidence indicating the asset is credit-impaired. There is evidence indicating that the debtor is in severe financial difficulty and the Club has no realistic prospect of recovery.

Lifetime ECL - not credit-impaired

In default

Lifetime ECL - credit-impaired

Write-off

Amount is written off

The Club determines the expected credit losses based on historical credit loss experience based on the past due status of the member, adjusted as appropriate to reflect current conditions and estimates of future economic conditions. Starting FY2022, The Club realigns the basis of the doubtful debt (credit loss) provision according to the Club’s Bylaws chapter 4.1.4 and 4.1.5., from > 180 days past due to > 90 days past due.