CSL Ltd Annual Report 2019

CSL Limited Annual Report 2019 117 Note 15: Trade Receivables and Payables (a) Trade and other receivables 2019 US$m 2018 US$m Current Trade receivables 1,274.4 1,114.9 Contract Assets 182.0 – Less: Provision for expected credit loss (17.5) (21.5) 1,438.9 1,093.4 Sundry receivables 266.0 272.1 Prepayments 116.8 112.5 Carrying amount of current receivables and contract assets 8 1,821.7 1,478.0 Non-current Long term deposits/other receivables 21.6 15.3 Carrying amount of non-current other receivables 8 21.6 15.3 Trade, other receivables, and contract assets are initially recorded at fair value and are generally due for settlement within 30 to 60 days from date of invoice. Collectability is regularly reviewed at an operating unit level. A provision for expected credit loss (ECL) is recognized in accordance with AASB 9. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. When a trade receivable for which a provision for impairment has been recognised becomes uncollectible in a subsequent period, it is written off against the provision. ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. Contract assets and deferred revenue (contract liabilities): The completion of performance obligations often differs from contract payment schedules, resulting in revenue that has been earned but not billed. These amounts are included in contract assets. Amounts billed in accordance with customer contracts, but where the Group had not yet provided a good or service, are recorded and presented as part of deferred revenue. Deferred revenue is recognised as revenue when the Group performs under the contract. Other current receivables are recognised and carried at the nominal amount due upon a unconditional right to payment. Non-current receivables are recognised and carried at amortised cost. They are non-interest bearing and have various repayment terms. As at 30 June 2019, the Group had made provision for impairment of $17.5m (2018: $21.5m). 2019 US$m 2018 US$m Opening balance at 1 July 21.5 22.6 Additional allowance/(utilised/written back) (3.5) (0.8) Currency translation differences (0.5) (0.3) Closing balance at 30 June 17.5 21.5 Non-trade receivables do not include any impaired or overdue amounts and it is expected they will be received when due. The Group does not hold any collateral in respect to other receivable balances. Key Judgements and Estimates In applying the Group’s accounting policy to trade and other receivables with governments and related entities in South Eastern Europe as set out in Note 11, significant judgement is involved in assessing the expected credit loss of trade or other receivable amounts. Matters considered include recent trading experience, current economic and political conditions and the likelihood of continuing support from agencies such as the European Central Bank. 8 The carrying amount disclosed above is a reasonable approximation of fair value. The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivable disclosed above. Refer to Note 11 for more information on the risk management policy of the Group and the credit quality of trade receivables.