Sasbadi Annual Report 2020

SASBADI HOLDINGS BERHAD 130 FINANCIAL STATEMENTS (continued) 26. Financial instruments (continued) 26.4 Credit risk (continued) Inter-company loans and advances Risk management objectives, policies and processes for managing the risk The Company provides unsecured loans and advances to its subsidiaries. The Company monitors the ability of the subsidiaries to repay the loans and advances on an individual basis. As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position. Loans and advances provided are not secured by any collateral or supported by any other credit enhancements. Recognition and measurement of impairment loss Generally, the Company considers loans and advances to subsidiaries have low credit risk. The Company assumes that there is a significant increase in credit risk when a subsidiary’s financial position deteriorates significantly. As the Company is able to determine the timing of payments of the subsidiaries’ loans and advances when they are payable, the Company considers the loans and advances to be in default when the subsidiaries are not able to pay when demanded. The Company considers a subsidiary’s loan or advance to be credit impaired when: x The subsidiary is unlikely to repay its loan or advance to the Company in full; or x The subsidiary is continuously loss making and is having a deficit shareholders’ fund. The Company determines the probability of default for these loans and advances individually using internal information available. 26.5 Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s exposure to liquidity risk arises principally from its various payables and borrowings. The Group maintains a level of cash and cash equivalents and banking facilities deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due. It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.