REA Group Ltd Annual Report 2021

Annual Report 2021 | REA Group Ltd 14. Trade and other receivables and contract assets Accounting policies Trade receivables are initially recognised at the transaction price. Due to their short-term nature, trade receivables have not been discounted. Trade receivables are generally due for settlement between 15 and 60 days. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for expected credit losses) is made when the Group expects that it will not be able to collect all amounts due according to the original terms of the receivables. The amount of the impairment allowance is the difference between the assetʼs carrying amount and the present value of estimated future cash flows. Contract assets relate to the provision of goods or services to a customer in advance of consideration being received or due and primarily arise because the consideration to be received is conditional. A provision matrix is used to calculate expected credit losses (“ECLs”) for trade receivables. The provision rates are based on days past due for groupings of customer segments that have similar loss patterns. The ECL calculation performed at each reporting date reflects the Groupʼs historical credit loss experience, adjusted for forward-looking factors specific to debtor profiles and the economic environment. Generally, trade receivables are written off if past due for more than one year. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 9. Impairment losses are recognised in the Consolidated Income Statement within operations and administration expenses. When a trade receivable for which an allowance has been recognised becomes uncollectible in a subsequent period, it is written off against the provision account. Key estimate and judgement The provision matrix used to calculate ECLs is initially based on the Groupʼs historical observed default rates and the matrix is adjusted for forward-looking information including the expected impact of COVID -19. The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is an estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Groupʼs historical credit loss experience and forecast of economic conditions may also not be representative of customersʼ actual default in the future. 2021 $ʼ000 2020 $ʼ000 Trade receivables 125,094 93,499 Provision for expected credit losses (5,528) (6,611) Net trade receivables 119,566 86,888 Current prepayments 21,008 9,659 Accrued income and other receivables 7,312 2,844 Current trade and other receivables 147,886 99,391 Non-current prepayments 824 875 Other assets 4,189 710 Other non-current assets 5,013 1,585 Total trade receivables and other assets 152,899 100,976 Year in review Directors’ Report Financial Statements Remuneration Report Sustainability Our Leaders 97