24 FINANCIAL RISK MANAGEMENT
(continued)
Credit risk
(continued)
The allowance account in respect of trade and other receivables is used to record impairment
losses unless the Group is satisfied that no recovery of the amount owing is possible. At that
point, the financial asset is considered irrecoverable and the amount charged to the allowance
account is written off against the carrying amount of the impaired financial asset.
Cash and fixed deposits are placed with financial institutions which are regulated. The Group
limits its credit risk exposure in respect of investments by only investing in liquid securities and
only with counterparties that have sound credit ratings thus management does not expect any
counterparty to fail to meet its obligations.
At 31 December 2014 and 31 December 2013, there were no significant concentrations of credit
risk. The maximum exposure to credit risk is represented by the carrying value of each financial
asset on the Statement of Financial Position.
Liquidity risk
The Manager monitors and maintains a level of cash and cash equivalents deemed adequate by
management to finance the Group’s operations and to mitigate the effects of fluctuations in cash
flows. Typically, the Group ensures that it has sufficient cash on demand to meet expected
operational expenses for a period of 60 days, including the servicing of financial obligations.
Market risk
Market risk is the risk that changes in market prices, such as interest rates, foreign exchange
rates and equity prices will affect the Group’s income or the value of its holdings of financial
instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimising the return on risk.
Foreign currency risk
The Group is exposed to foreign currency risk on interest-bearing borrowings that were
denominated in a currency other than the functional currency of the Group. The currencies
giving rise to this risk are United States Dollars (“USD”), Hong Kong Dollars (“HKD”) and
Japanese Yen (“JPY”). The Group hedges this risk by entering into cross currency swaps with
notional contract amounts of USD500.0 million, USD400.0 million, HKD1.15 billion, JPY10.0
billion, HKD885.0 million, JPY10.0 billion, JPY5.0 billion and HKD650.0 million. All sums payable
in respect of the cross currency swaps are guaranteed by the Trustee.
Sensitivity analysis
A 10.0% strengthening of Singapore dollar against the following foreign currency at the
reporting date would decrease the Statement of Total Return and Unitholders’ Funds as at 31
December 2014 by the amounts shown below. This analysis assumes that all other variables, in
particular, interest rates, remain constant.
Leading with Confidence | 195
