SEO Version
FORTERRA
ANNUAL REPORT 2013
NOTES TO THE
FINANCIAL STATEMENTS
124
29
FINANCIAL RISK MANAGEMENT (CONTINUED)
(a) Credit risk
Credit risk is the potential financial loss resulting from the failure of a customer or a
counterparty to settle its financial and contractual obligations to the Group, as and when
they fall due.
Cash and bank balances are placed with the licensed financial institutions. The derivatives
are entered into with bank and financial institution counterparties which are rated “A” or
equivalent.
Trade receivables relate mainly to the Group’s tenants. The Group’s exposure to credit
risk is influenced by the individual characteristics of each tenant. Customers are grouped
according to their trade/business e.g. retail, office, mixed use. Receivables are reviewed
monthly. There are no significant concentrations of credit risk with a single customer as the
Group has a large number of tenants who pay their rentals in advance and some properties
are rented subject to deposits, so that in the event of non-payment, the Group has recourse
to this deposit. The Group establishes an allowance for impairment loss that represents its
estimate of incurred losses in respect of trade and other receivables, if required.
The carrying amount of financial assets in the statement of financial position represents the
Group’s and the Trust’s maximum exposure to credit exposure, before taking into account
any collateral held. The Group and the Trust does not hold any collateral in respect of its
financial assets.
The Group’s policy is to provide financial guarantees only to wholly-owned subsidiaries.
The maximum exposure of the Trust in respect of the intra-group financial guarantee at
the end of the reporting period is $485,593,000 (2012: $634,905,000).
(b) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations
associated with its financial liabilities that are to be settled by delivering cash or another
financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible,
that it will always have sufficient liquidity to meet its liabilities when due, under both normal
and stressed conditions, without incurring unacceptable losses or risking damage to the
Group’s reputation.
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