Lendlease Annual Report 2022

148 Lendlease Annual Report 2022 Notes to Consolidated Financial Statements continued June 2022 June 2021 $m $m Provision for Impairment Carrying amount at beginning of financial year 16 18 Bad and doubtful debts impairment loss net of provisions written back 3 - Utilised bad and doubtful debts impairment provision - (1) Other movements (including foreign exchange rate movements) (1) (1) Carrying amount at end of financial year 18 16 Total impairment as a percentage of total loans and receivables 0.5% 0.4% The credit quality of all loans and receivables, including those neither past due nor impaired, is assessed and monitored on an ongoing basis. As the majority of the Group’s customers are government entities for the Construction business and are institutional investors in the Development and Investment businesses, no additional risk has been identified. Impairment as noted above was immaterial at 30 June 2022. The impairment provision relates to specific loans and receivables that have been identified as being impaired, including related party loans where the Group’s interest in a development was via an equity accounted investment. June 2022 June 2021 21.a. Contract Assets Note $m $m Current Contract debtors 1 291 247 Construction contract assets 2 11 664 565 Accrued income 82 78 Total contract assets 1,037 890 1. Movements in contract debtors during the financial year relate primarily to additional work performed not yet transferred into Trade receivables as the right to receive payment from the customer has not become unconditional. 2. Movements in construction contract assets during the financial year relate primarily to revenue recognised on construction contracts with customers in excess of billings raised during the financial year. 22. Trade and Other Payables Accounting Policies Trade Creditors Liabilities are recognised for amounts to be paid in the future for goods or services received, whether or not billed to the Group. Trade and other payables are settled in the normal course of business. Trade and other payables are carried at amortised cost using the effective interest method, which applies the interest rate that discounts estimated future cash outflows over the term of the trade and other payables. Cash flows relating to short term trade and other payables are not discounted if the effect of discounting is immaterial. The discount, if material, is then recognised as an expense over the remaining term. Construction Contract Liabilities Construction contracts where the total progress billings issued to clients (together with foreseeable losses, if applicable) on a project exceed the revenue recognised (costs incurred to date plus recognised profit) on the contract are recognised as a liability. Retentions Retentions are amounts payable for the purpose of security and for the provision of defects in accordance with contract terms. Release of retention amounts are in accordance with contractual terms. Unearned Income Primarily relates to unearned income and deposits received in advance on presold apartments. These amounts will be recognised as income in line with the ‘Sale of development properties’ accounting policy in Note 4 ‘Revenue from Contracts with Customers’ . Lease Liabilities Lease liabilities are measured at the present value of the lease payments discounted using the interest rate implicit in the lease. The Group uses its incremental borrowing rate as the discount rate. Section C. Liquidity and Working Capital continued 21. Loans and Receivables continued