15 FINANCIAL RISK MANAGEMENT (CONTINUED)
15.3 Credit risk (continued)
The Group establishes an allowance account for impairment that represents its estimate of incurred
losses in respect of loans and receivables. The main component of this allowance is estimated losses
that relate to specific tenants or counterparties. The allowance account is used to provide for impairment
losses. Subsequently when the Group is satisfied that no recovery of such losses is possible, the financial
asset is considered irrecoverable and the amount charged to the allowance account is then written off
against the carrying amount of the impaired financial asset.
The ageing of trade receivables that were not impaired at the reporting date was:
Group and Trust
2014
2013
$’000
$’000
Not past due
61
13
Past due 0 - 30 days
448
425
Past due 31 - 60 days
5
45
More than 60 days past due
8
–
522
483
The Group believes that all amounts which are past due are collectible, based on historic payment
behaviour and the retention of sufficient security in the form of bankers’ guarantees or cash security
deposits from tenants, and hence no impairment allowance is necessary.
Cash and fixed deposits are placed with financial institutions which are regulated. The Group limits its
credit risk exposure by dealing with counterparties that have sound credit ratings. Given these high credit
ratings, management does not expect any counterparty to fail to meet its obligations.
15.4 Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with
its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach
to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or
risking damage to the Group’s reputation.
The Manager monitors and maintains a level of cash and cash equivalents deemed adequate to finance
the Group’s operations and to mitigate the effects of fluctuations in cash flows. In addition, the Manager
also monitors and observes the CIS Code issued by the MAS concerning limits on total borrowings.
Year ended 31 December 2014
NOTES TO THE FINANCIAL STATEMENTS
SABANA REIT
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ANNUAL REPORT 2014
126
