Founded in 1987, Huawei is a leading global provider of information and communications

       
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(ii) Impairment of trade receivables and 
contract assets
The credit risk of customers is regularly 
assessed with a focus on the customer’s 
ability and willingness to pay, reflected by 
the Group’s estimation of the expected credit 
loss allowance on trade receivables and 
contract assets. The Group estimates expected 
credit loss by assessing the loss that will be 
incurred given customer default based on past 
payment experience and adjusted by the cash 
flow expected from collateral or credit risk 
mitigation received where these are considered 
to be integral to the asset, and by assessing 
the probability of default taking into account 
information specific to the customer as well 
as pertaining to the country and economic 
environment in which the customer operates. 
The estimate also incorporates forward looking 
data.
Impairment is assessed on an individual basis 
for trade receivables and contract assets 
meeting pre-determined criteria, including 
customers in financial difficulties, and contracts 
with risk mitigation arrangements or significant 
financing arrangements, amongst others. Apart 
from receivables and contract assets that have 
been assessed and provided for individually, 
allowances are estimated using provision 
matrices by management with reference to 
the customers’ credit risk ratings and aging 
analysis of the remaining trade receivable and 
contract asset balances. Different provision 
matrices have been developed by the Group 
based on different customer groups which 
exhibit different risk characteristics.
If the financial condition of customers were 
to deteriorate or improve, or actual future 
economic performance is different to the 
Group’s estimates, additional allowances or 
reversals may be required in future periods.