33. Financial risk management objectives and policies (cont’d)
(a) Market risk (cont’d)
(ii) Foreign currency risk (cont’d)
Sensitivity analysis
The following table demonstrates the sensitivity of the Group’s and Company’s
profit before tax to a reasonably possible change in the USD, EUR, IDR and
RMB exchange rates against the respective functional currencies of the Group
entities, with all other variables held constant.
A 5% strengthening of the following foreign currencies against Singapore
Dollar at 30 June would increase/(decrease) profit before tax by the amounts
shown below. A 5% weakening of the following foreign currencies against
Singapore Dollar at 30 June would have the equal but opposite effect.
Group
Company
2015 2014 2015 2014
Profit
Profit
Profit
Profit
before tax before tax before tax before tax
$’000 $’000 $’000 $’000
USD
(5,443)
(4,489)
136
127
EUR
609
13
(2)
(3)
IDR
(101)
(142)
–
–
RMB
(23)
(79)
–
–
(b) Credit risk
Credit risk is the risk of loss that may arise on outstanding financial instruments
should a counterparty default on its obligations. The Group manages its exposure
to credit risk arising from sales to trade customers through credit evaluation, credit
limits and debt monitoring procedures on an on-going basis. Where appropriate, the
Group obtains guarantees from the customers or arrange netting agreements. Cash
terms, advance payments or letters of credit are required for customers of lower
credit standing.
The Group’s major classes of financial assets are bank balances, deposits and cash
and trade receivables. Cash at banks and deposits are placed in banks and financial
institutions with good credit rating.
The Group establishes an allowance for impairment that represents its estimate
of incurred losses in respect of trade receivables. The main components of this
allowance are a specific loss component that relates to individually significant
exposures. Where the Group is certain that no recovery of the amount owing is
possible, the financial asset is considered irrecoverable and the amount charged to
the impairment account is written off against the carrying amount of the impaired
financial asset.
The ageing analysis of trade receivables and allowance for impairment of doubtful
trade receivables is disclosed in Note 11.
NOTES TO THE FINANCIAL
STATEMENTS
For the financial year ended 30 June 2015
ASL Marine Holdings Ltd. /Annual Report 2015
153
