NOTES TO THE FINANCIAL STATEMENTS
FOR THE FInAncIAL yEAR EnDED 30 JunE 2016
30
FINANCIAL INSTRUMENTS (CONT’D)
b)
Financial risk management objectives and policies
The Group is exposed to financial risks arising from its operations and the use of financial instruments.
The key financial risks include foreign currency risk, interest rate risk, credit risk and liquidity risk. The
policies for managing each of these risks are summarised below. The Directors review and agree policies
and procedures for the management of these risks.
There has been no change to the Group’s exposure to these financial risks or the manner in which the
Group manages and measures financial risk.
Foreign currency risk
The Group does not have significant exposure to foreign currency risk as its transactions are mainly in
Singapore dollars.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flow of the Group’s financial instruments will
fluctuate because of changes in market interest rates. The Group’s income and operating cash flows are
substantially independent on changes in market interest rates as the Group has no significant interest-
bearing assets and liabilities except for other investment (note 13), fixed deposits (note 18), finance lease
liabilities (note 19) and bank borrowings (note 21). The sensitivity analysis for interest rate risk is not
disclosed as a reasonably possible fluctuation in the market interest rates has no significant impact on
the Group’s profit or loss.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in
financial loss to the Group. The Group has credit policies in place and the exposure to credit risk is
monitored on an ongoing basis by the management.
The Group’s trade receivables comprise 8 debtors (2015: 5 debtors) that represented approximately 57%
(2015: 67%) of the trade receivables.
Exposure to credit risk
At the end of the financial year, the Group’s and the Company’s maximum exposure to credit risk is
represented by: the carrying amount of each class of financial assets recognised in the statements
of financial position; and a nominal amount of $3,421,000 (2015: $2,328,000) relating to corporate
guarantees provided by the Company to financial institutions in relation to certain subsidiaries’ bank
facilities.
104
ISOTEAM LTD.
ANNUAL REPORT 2016
