NOTES TO THE FINANCIAL STATEMENTS Cont’d 29. Financial instruments cont’d 29.4 Credit risk cont’d Inter-company receivables and loans and advances cont’d Exposure to credit risk, credit quality and collateral 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 Group and the Company consider receivables and loans and advances to subsidiaries and associates to have low credit risk. The Group and the Company assume that there is a significant increase in credit risk when a subsidiary’s and associate’s financial position deteriorates significantly. As the Group and the Company are able to determine the timing of payments of the subsidiaries’ and associates’ loans and advances when they are payable, the Group and the Company consider the loans and advances to be in default when the subsidiaries and associates are not able to pay when demanded. The Group and the Company consider a subsidiary’s and associate’s loan or advance to be credit impaired when: • The subsidiary or associate is unlikely to repay its loan or advance to the Group or to the Company in full; or • The subsidiary or associate is continuously loss making and is having a deficit shareholders’ fund. The Group and the Company determine the probability of default for these loans and advances individually using internal information available. As at the end of the reporting period, there was no indication that the receivables and loans and advances to subsidiaries and associates are not recoverable. As these amounts are considered to have low credit risk, the Group and the Company are of the view that the loss allowance is not material and hence, they are not provided for. 29.5 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, loans and borrowings. The Group maintains a level of cash and cash equivalents and bank facilities deemed adequate by 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. PRESS METAL ALUMINIUM HOLDINGS BERHAD 287
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