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Notes to the Financial Statements
For the fnancial year ended 31 December 2012
35. Financial risk management objectives and policies (cont’d)
(d) Credit risk
Credit risk is the risk of loss that may arise on outstanding fnancial instruments should a counterparty default on its obligations.
The Group has credit risk arising from the credit granted to its customers and plasma farmers and placement of current
accounts and deposits in the banks.
Other than as disclosed below, the Group has no concentration of credit risk.
Cash and cash equivalents
Credit risk arising from placements of current accounts and deposits is managed in accordance with the Group’s policy.
Investments of surplus funds are limited for each bank and reviewed annually by the board of directors. Such limits are
set to minimize the concentration of credit risk and therefore mitigate fnancial loss through potential failure of the banks.
Trade receivables
The Group has policies in place to ensure that sales of products are made only to creditworthy customers with proven track
record or good credit history. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit
verifcation procedures. For export sales, the Group requires cash against the presentation of documents of title. For domestic
sales, the Group may grant its customers credit terms from 7 to 42 days from the issuance of invoice. The Group has policies
that the limit amount of credit exposure to any particular customer, such as, requiring sub-distributors to provide bank
guarantees. In addition, receivable balances are monitored on an ongoing basis to reduce the Group’s exposure to bad debts.
When a customer fails to make payment within the credit terms granted, the Group will contact the customer to act on the
overdue receivables. If the customer does not settle the overdue receivable within a reasonable time, the Group will proceed
to commence legal proceedings. Depending on the Group’s assessment, specifc provisions may be made if the debt is
deemed uncollectible. To mitigate credit risk, the Group will cease the supply of all products to customers in the event of
late payment and/or default.
Plasma Receivables
As disclosed in Notes 3.9 and 32(a), plasma receivables represent costs incurred for plasma plantation development which
include costs for plasma plantations funded by the banks and temporarily self funded by the subsidiaries awaiting banks’
funding.
Plasma receivables also include advances to plasma farmers for topping up loan instalments to the banks, advances for
fertilisers and other agriculture supplies. These advances shall be reimbursed by the plasma farmers and the collateral in
form of titles of ownership of the plasma plantations will be handed over to the plasma farmers once the plasma receivables
have been fully repaid.
The Group through partnership scheme also provides technical assistance to the plasma farmers to maintain the productivity
of plasma plantations as part of the Group’s strategy to strengthen relationship with plasma farmers which is expected to
improve the repayments of plasma receivables.
At the end of the reporting period, the Group’s maximum exposure to credit risk is represented by the carrying amount of
each class of fnancial assets recognised in the balance sheets.
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