Efficiency of Operation Note 13: Receivables, Contract Assets and Payables (a) Receivables and contract assets 2024 2023 US$m US$m Trade receivables 2,086 1,424 Contract assets 202 188 Less: Provision for expected credit losses (16) (12) Carrying amount of trade receivables and contract assets – current 2,272 1,600 Other receivables 369 305 Prepayments 254 309 Carrying amount of receivables and contract assets – current 2,895 2,214 Other receivables 158 96 Carrying amount of receivables and contract assets - non-current 158 96 Receivables are initially recorded at their transaction price and are generally due for settlement within 30 to 60 days from date of invoice. Collectability is regularly reviewed at an operating unit level. For trade receivables and contract assets, the Group recognises a provision for expected credit losses (ECL) based on a simplified approach. 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 historical credit loss experience, adjusted for forward-looking factors specific to the debtors and economic environment. When a trade receivable for which a provision for ECL has been recognised becomes uncollectible in a subsequent period, it is written off against the provision. The following table illustrates the movement in the Group’s provision for expected credit losses. The carrying amount of receivables and contract assets 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 10 for more information on the risk management policy of the Group and the credit quality of trade receivables. 2024 2023 US$m US$m Opening balance as at 1 July 12 17 Additional allowance / (allowance utilised/written back) 4 (5) Closing balance at 30 June 16 12 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 10, 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. As at 30 June 2024, receivables totalling $123m (2023: $286m) had been sold as part of the Group's non-recourse receivable factoring arrangements. The receivables were derecognised upon sale as substantially all risks and rewards associated with the receivables passed to the purchaser. These arrangements were transacted with non-US dollar high quality counterparties as part of the Group's foreign exchange risk mitigation strategy (Note 10). The completion of performance obligations often differs from contract payment schedules. A contract asset is initially recognised for revenue earned from satisfying a performance obligation. However, the receipt of consideration is conditional upon the full satisfaction of the performance obligation within the contract. Upon completing the full performance obligation, the amount recognised as contract assets is reclassified to trade receivables. Contract liabilities (deferred revenue) represents amounts billed in accordance with customer contracts, but where the Group had not yet provided a good or service. These amounts are presented within trade and other payables (within accruals and other payables) and recognised as revenue when the Group performs under the contract. Other current receivables are recognised and carried at the nominal amount due upon an unconditional right to payment. Non-current receivables are recognised and carried at amortised cost. They are non-interest bearing and have various repayment terms. 134 Notes to the Financial Statements Limited Annual Report 2023/24
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