notes to the financial statements
for the financial year ended 31 December 2014 (Continued)
51 FINANCIAL RISKMANAGEMENT OBJECTIVES AND POLICIES
The Group’s and Company‘s overall financial risk management objectives and policies are to ensure that the Group and the Company create value and maximise
returns for its shareholders. Financial risk management is carried out through risk review, internal control systems, benchmarking to the industry’s best practices and
adherence to the Group’s financial risk management policies.
The main risks arising from the financial instruments of the Group and the Company are credit risk, market risk, and liquidity risk. Management monitors the Group’s
and the Company’s financial position closely with the objective to minimise potential adverse effects on the financial performance of the Group and of the Company.
The following sections provide details regarding the Group’s and the Company’s exposure to the above mentioned financial risks and the objectives, policies and
processes for managing these risks.
Credit risk
Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Group and the Company.
At the reporting date, the Group’s and the Company’s maximum exposure to credit risk is represented by the carrying amounts of each class of financial assets
recognised in the statements of financial position, including derivative financial instruments with positive fair values.
(a)
Receivables
The Group’s and the Company’s exposure to credit risk is monitored on an ongoing basis. The Group and the Company have credit policies in place to manage the
credit risk exposure. The risk is managed through the application of the Group’s and the Company’s credit management procedures which include the application
of credit evaluations or approvals and follow up procedures.
The Group and the Company actively monitor the utilisation of credit limits to manage the risk of any material loss from the non-performance of its counter-
parties.
(b)
Intercompany balances
The Company provides unsecured loans and advances to subsidiaries. The Company monitors the results of its subsidiaries regularly.
As at 31 December 2014, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position.
Management has taken reasonable steps to ensure that intercompany receivables are stated at the realisable values. As at 31 December 2014, there was no
indication that the loans and advances extended to the subsidiaries are not recoverable.
(c)
Derivative financial instruments
Transactions involving derivative financial instruments are with approved financial institutions and reputable banks.
As at the end of the reporting period, the maximum exposure to credit risk arising from derivatives financial assets is represented by the carrying amounts in
the statement of financial position.
In view of the counterparties being reputable licensed financial institutions, management does not expect any of the counterparties to fail to meet their
obligations.
(d)
Financial guarantees
The Company provides unsecured financial guarantees to banks in respect of banking facilities granted to certain subsidiaries. The Company monitors on an
ongoing basis the results of the subsidiaries and repayment made by the subsidiaries.
165
Wah Seong Corporation Berhad • Annual Report 2014
