31 FINANCIAL RISK MANAGEMENT
(CONT’D)
(b)
Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in
financial loss to the Group. For trade receivables, the Group adopts the policy of dealing only with
customers with an appropriate credit history, and obtaining sufficient security where appropriate to
mitigate credit risk. For other financial assets, the Group adopts the policy of dealing only with high
credit quality counterparties.
Credit exposure to an individual counterparty is restricted by credit limits that are approved by the
management based on an ongoing credit evaluation. The counterparty’s payment profile and credit
exposure are continuously monitored at the entity level and at the Group level by management. Where
appropriate, the Group obtains advance payments from its major customers.
The Group has a significant concentration of credit risk from its trade receivables as approximately
59.1% (2013: 66.9%) of the trade receivables outstanding as at the end of the financial year are owing
from not more than 5 (2013: not more than 5) customers.
As the Group does not hold any material collateral, the maximum exposure to credit risk for each
class of financial instruments is the carrying amount of that class of financial instruments presented
on the statement of financial position.
The credit risk for trade receivables based on the information provided to key management is as
follows:
Group
2014
2013
US$’000
US$’000
America
5,187
7,609
Europe
4,256
6,108
Asia
4,488
3,622
Rest of the World
1,475
1,817
15,406
19,156
(i)
Financial assets that are neither past due nor impaired
Bank deposits that are neither past due nor impaired are mainly deposits with banks with high
credit-ratings assigned by international credit-rating agencies. Trade receivables of the Group
and amounts due from subsidiaries of the Company that are neither past due nor impaired are
substantially companies with a good collection track record with the Group and the Company.
Trade receivables of the Group that are neither past due nor impaired are as follow:
Group
2014
2013
US$’000
US$’000
Trade receivables:
– Not past due and not impaired
10,310
12,929
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014
GLOBAL INVACOM GROUP LIMITED
ANNUAL REPORT 2014
95
