CITIC Limited Half-Year Report 2019

100 CITIC Limited Half-Year Report 2019 For the six months ended 30 June 2019 29 Financial risk management and fair values (continued) (a) Credit risk (continued) Measurement of ECL (continued) (1) Significant increase in credit risk (continued) By setting quantitative and qualitative threshold, and upper limit, the Group determines whether the credit risk of financial instruments has increased significantly since initial recognition. The judgment mainly includes (1) default probability of borrower/debtor changes; (2) significant adverse changes in business, financial or operating conditions of borrowers and in economic conditions; (3) significant increase in other credit risk. For the borrowers who are 30 days (exclusive) to 90 days (inclusive) past due on their contractual payments (including principal and interest), the Group considers that their credit risk has increased significantly and classifies them to stage 2. (2) Definition of credit-impaired assets When credit impairment occurred, the Group defines that the financial asset is in default. In general, a financial asset that is overdue for more than 90 days is considered to be in default. When one or more events that adversely affect the expected future cash flow of a financial asset occurs, the financial asset becomes a credit-impaired financial asset. Evidence of credit-impaired financial assets includes the following observable information: – The issuer or borrower/debtor is in significant financial difficulties; – The borrower/debtor is in breach of financial covenant(s) such as default or overdue in repayment of interests or principle etc; – The creditor gives the debtor concession that would not be offered otherwise, considering economic or contractual factors relating to the debtor’s financial difficulties; – It is becoming probably that the borrower/debtor will enter bankruptcy or other debt restructuring; – An active market for that financial asset has disappeared because of financial difficulties from issuer or borrower/debtor; – Financial assets are purchased or originated at a deep discount that reflects the incurred credit losses. The Group’s default definition has been consistently applied to the modeling of default probability, default risk exposure and default loss rate in the Group’s expected credit loss calculation process. (3) Inputs for measurement of ECL The ECL is measured on either a 12-month or lifetime basis depending on whether a significant increase in credit risk has occurred or whether an asset is considered to be credit-impaired. Related definitions are as follows: Notes to the Consolidated Financial Statements