Ntegrator International Ltd. - Annual Report 2020

73 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2020 3. Critical accounting estimates, assumptions and judgements Estimates, assumptions and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 3.1 Critical accounting estimates and assumptions Expected credit loss on financial assets As at 31 December 2020, the financial assets that are exposed to credit risk are primarily from trade receivables, bills receivables, contract assets and unbilled revenue arising from project sales, project management and maintenance service revenue. The gross amount of these financial assets amounted to S$16,707,000 (2019: S$26,685,000). Accordingly, the allowance for expected credit loss provided as at 31 December 2020 amounted to S$14,000 (2019: S$71,000). If the allowance for expected credit loss at the reporting date had been higher/lower by 1% from management’s estimates, the Group’s net results would have been lower/higher by S$140 (2019: S$710). With reference to SFRS(I) 9 Financial Instruments , the Group applies simplified approach (lifetime expected credit loss allowance). In determining the expected credit losses (“ECL”), the Group has considered the historical observed default rates, customer ability to repay and adjusted with available forward-looking information. The Group’s credit risk exposure for trade receivables, bills receivables, and contract assets are set out in Note 24(b) to the financial statements. 3.2 Critical judgements in applying the entity’s accounting policies Deferred income tax assets The Group recognises tax liabilities and assets tax based on an estimation of the likely taxes due, which requires significant judgement as to the ultimate tax determination of certain items. Where the actual amount arising from these issues differs from these estimates, such differences will have an impact on income tax and deferred tax amounts in the period when such determination is made. In addition, management judgement is required in determining the amount of current and deferred tax recognised and the extent to which amounts should or can be recognised. A deferred tax asset is recognised for tax losses and donations carried forward if it is probable that the entities within the Group will generate sufficient taxable profit in future periods to benefit from a reduction in tax payments. This involves the management making assumptions within its overall tax planning activities and periodically reassessing them in order to reflect changed circumstances as well as tax regulations. Due to their inherent nature, assessments of deferred tax asset are judgmental and not subjected to precise determination. The Group has unrecognised tax losses of S$17,816,000 (2019: S$10,901,000), capital allowances of S$1,037,000 (2019: S$746,000) and donations of S$498,000 (2019: S$478,000) carried forward at the reporting date. If the unrecognised tax losses at the reporting date had been higher/lower by 1% from management’s estimates, the Group’s net results would have been lower/higher by S$194,000 (2019: S$121,000). If the tax authority regards the entities within the Group as not satisfying and/or meeting certain statutory requirements in their respective countries of incorporation, the unrecognised tax losses and donations will be forfeited.