Notestothefinancialstatements
For the financial year ended31December 2015
25.
Financial riskmanagement objectivesandpolicies (cont’d)
Credit risk
Credit risk is the riskof loss thatmayariseonoutstanding financial instrumentsshouldacounterpartydefault on itsobligations. TheGroup’sexposure tocredit
risk arises primarily from trade and other receivables. For other financial assets (including cash and cash equivalents), the Groupminimises credit risk by
dealingexclusivelywithhigh credit rating counterparties.
TheGroup’s objective is to seek continual revenue growthwhileminimising losses incurred due to increased credit risk exposure. TheGroup trades onlywith
recognisedandcreditworthy thirdparties. It is theGroup’spolicy thatallcustomerswhowish to tradeoncredit termsaresubject tocreditverificationprocedures.
Inaddition, receivablebalancesaremonitoredonanongoingbasiswith the result that theGroup’sexposure tobaddebts isnot significant.
Credit risk concentrationprofile
TheGroupdetermines concentrations of credit riskbymonitoring the country profileof its trade receivables onanongoingbasis. The credit risk concentration
profileof theGroup’s trade receivablesat theendof the reportingperiod isas follows:
Group
2015
2014
$’000
%
$’000
%
Bycountry
Singapore
6,693
83
2,843
48
China
399
5
1,673
29
MiddleEast
781
10
937
16
AsiaPacific (excludingChinaandSingapore)
138
2
352
6
Others
2
–
43
1
8,013
100
5,848
100
At theendof the reportingperiod, approximately:
– 94% (2014: 74%) of theGroup’s trade receivablesweredue from3 (2014: 4)major customerswhoare located inSingapore,MiddleEast andChina.
– Anominalamountofapproximately$96,639,000 (2014:$94,812,000)relating toacorporateguaranteeprovidedby theCompany tobanks for itssubsidiaries’
banking facilities.
25.
Financial riskmanagement objectivesandpolicies (cont’d)
Credit risk (cont’d)
Financial assets that areneither past duenor impaired
Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment record with the Group. Cash and short-term
deposits thatareneitherpastduenor impairedareplacedwithorentered intowithreputable financial institutionswithhighcredit ratingsandnohistoryofdefault.
Financial assets that areeither past dueor impaired
Information regarding financial assets that areeither past dueor impaired isdisclosed inNote17 (Tradeandother receivables).
Foreigncurrency risk
TheGrouphas transactional currency exposuresarising from salesor purchases that aredenominated ina currency other thanSGD. The foreign currencies in
which these transactionsaredenominatedaremainlyUSDollars (USD)andEuro.Approximately99% (2014:99%)of theGroup’ssalesaredenominated in foreign
currencieswhilst about 51% (2014: 39%) of costs aredenominated in foreign currencies. TheGroup’s trade receivableand tradepayablebalances at theendof
the reportingperiodhave similar exposures.
The Group also holds cash and short-term deposits denominated in foreign currencies for working capital purposes. At the end of the reporting period, such
foreign currency balances (mainly inUSDandEuro) amount toapproximately$46,302,000 (2014: $65,557,000) for theGroup.
TheGroupand theCompany’s investment inquoted corporatebonds that aredenominated inUSDamount toapproximately$5,454,000 (2014: $4,610,000).
Tominimise foreignexchange risks, theGrouppractisesnatural hedging asmuch as possible. TheGroup alsomonitorsmovement in foreignexchange closely
soas to capitaliseon favourableexchange rates to convert excess foreign currenciesback toSGDwherepossible.
TheGroupdoesnot applyhedgeaccounting for such foreign currency denominated salesandpurchases.
124
125
BAKERTECHNOLOGYlimited
ANNUAL REPORT 2015
