Financial risk management objectives and policies (continued)
The Group’s principal financial assets are available-for-sale investments, investment in convertible bonds, notes receivable, amounts due from associates, trade debtors, structured notes designated at FVTPL and bank balances and cash. The Group’s maximum exposure to credit risk in the event of the counterparties failure to perform their obligations as at 31 December 2010 in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the consolidated statement of financial position.
The credit risk on liquid funds, notes receivable and structured notes designated as at FVTPL are limited because the counterparties are banks and financial institutions with high credit-ratings assigned by international credit- rating agencies.
The Group’s credit risk is primarily attributable to its available-for-sale investments, investment in convertible bonds, trade debtors and amounts due from associates. The trade debtors presented in the consolidated statement of financial position are net of allowances for doubtful debts. In determining the recoverability of a trade debtor, the Group considers any change in the credit quality of the trade debtor from the date credit was initially granted up to the reporting date.
In order to minimise the credit risk, management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures which are carried out to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade and other debtors and investment in convertible bonds at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the Directors consider that the Group’s credit risk is significantly reduced.
Other than concentration of credit risk on investment in convertible bonds, notes receivable and structured notes designated at FVTPL, the Group has no significant concentration of credit risk, with exposure spread over a number of counterparties and customers.
Annual Report 2010