Kimlun Corporation Berhad Annual Report 2018

30. Fair value (cont’d) (b) Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximations of fair value (cont’d) The carrying amounts of these financial assets and liabilities of the Group and of the Company at the reporting date approximate fair values due to the relatively short term maturity of these financial instruments whilst the carrying value of long term borrowings approximates fair value based on the current rates available for borrowings with the same maturity profile. Fair values of retention sums on construction contracts are estimated by discounting expected future cash flows at market incremental lending rates at the reporting date. Guarantees The fair value of the guarantees provided by the Company in connection with credit facilities, construction contracts and development agreement granted to its subsidiaries is not significant as it is not probable that the financial institutions and third parties will call upon the guarantees. 31. Financial risk management objectives and policies The Group and the Company are exposed to financial risks arising from their operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk and interest rate risk. The Board of Directors approves and reviews policies and procedures for the management of these risks, which are executed by the Management. The audit committee provides independent oversight to the effectiveness of the risk management process. The Group and the Company do not undertake any trading of derivative financial instruments. The following sections provide details regarding the Group's and the 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 the Company’s exposure to credit risk arises primarily from trade and other receivables. For cash and bank balances, the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties. The Group and the Company minimise and monitor its credit risk by strictly limiting the Group's and Company's associations to business partners with high credit worthiness. Receivable balances are monitored on an ongoing basis. Exposure to credit risk At the reporting date, 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. - an amount of RM679,538,530 (31.12.2017: RM607,001,468; 1.1.2017: RM577,924,735) relating to corporate guarantees provided by the Company to several financial institutions for its subsidiaries' credit facilities, and to third parties for the credit facilities granted by suppliers and the joint venture and subsidiaries' performance in construction contracts. Credit risk concentration profile The Group and the Company do not have any significant exposure to any individual customers or counterparties nor does it have any major concentration of credit risk related to any financial instruments. Financial assets that are neither past due nor impaired Information regarding trade and other receivables that are neither past due nor impaired is disclosed in Note 20. Deposits with banks that are neither past due nor impaired are placed with or entered into with reputable financial institutions. Financial assets that are either past due or impaired Information regarding financial assets that are either past due or impaired is disclosed in Note 20. Kimlun Corporation Berhad 113 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2018 (cont’d)