Table of Contents
IKANG HEALTHCARE GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
(In thousands of US dollars, except share and per share data, or otherwise noted)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Accounts receivable and allowance for doubtful accounts
Accounts receivable represents those receivables derived in the ordinary course of business. A general allowance for doubtful accounts is provided based on aging analyses of accounts receivable balances, historical bad debt rates, in addition to specific provisions established based on customers repayment patterns and customer credit worthiness.
The Group decides to write off a receivable and the corresponding provision when events indicate that there is a remote chance that an account receivable can be collected, such as liquidation of a customer or termination of business cooperation.
Financial instruments of the Group primarily consist of cash and cash equivalents, restricted cash, term deposits, accounts receivable, available-for-sale investments, amount due from/to related parties, accounts payable, short-term borrowings and long-term borrowings.
The carrying values of cash and cash equivalents, restricted cash, term deposits, accounts receivable, accounts payable, amounts due from/to related parties, and short-term borrowings approximate their fair values due to short-term maturities.
Effective interest method
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Interest expense is recognized on an effective interest basis relating to financing arrangements included in the long-term borrowings.
Fair value measurements
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.
Authoritative literature provides a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset or liability categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement as follows: