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HG METAL MANUFACTURING LIMITED
ANNUAL REPORT 2014
NOTES TO THE
FINANCIAL STATEMENTS
for the financial year ended 31 December 2014
33.
FAIR VALUE OF ASSETS AND LIABILITIES (CONT’D)
Fair value hierarchy (cont’d)
(c)
Fair value of financial instruments by classes that are not carried at fair value and
whose carrying amounts are not reasonable approximation of fair value (cont’d)
* Investment in equity securities carried at cost
Fair value information has not been disclosed for the Group’s investments in equity securities
that are carried at cost because fair value cannot be measured reliably. These equity securities
represent ordinary shares in a company that is not quoted on any market and does not
have any comparable industry peer that is listed. In addition, the variability in the range of
reasonable fair value estimates derived from valuation techniques is significant. The Group
does not intend to dispose of this investment in the foreseeable future.
34.
FINANCIAL RISK MANAGEMENT
The Group and the Company are exposed to financial risks arising from its operations and the use
of financial instruments. The key financial risks include credit risk, liquidity risk, interest rate risk,
foreign currency risk and market price risk. The Board of Directors reviews and agrees policies and
procedures for the management of these risks, which are executed by the Financial Controller.
The following sections provide details regarding the Group’s and Company’s exposure to the above-
mentioned financial risks and the objectives, policies and processes for the management of these
risks.
(a)
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’s and Company’s credit risk arises primarily
from trade and other receivables. For other financial assets (including derivatives financial
instruments, investment held for trading and cash and cash equivalents), the Group and the
Company minimise credit risks by dealing exclusively with high credit rating counterparties.
The Group and Company have a credit policy in place and the exposure to credit risk is
monitored on an on-going basis. Credit review, which takes into account qualitative and
quantitative factors like business performance and profile of the customers, is performed and
approved by the management before credit is granted. The customer’s payment profile and
credit exposures are monitored on an on-going basis by the Credit Controller.
