NewWorld Development Company Limited
FINANCIAL SECTION
132
4 FINANCIAL RISK MANAGEMENT AND FAIR VALUE ESTIMATION
(continued)
(b) Credit risk
The credit risk of the Group mainly arises from deposits with banks, trade and other debtors and balances
receivable from investee companies, joint ventures, associated companies and debt securities. The exposures
to these credit risks are closely monitored on an ongoing basis by established credit policies in each of its core
businesses.
Bank deposits are mainly placed with high-credit-quality financial institutions. Trade debtors mainly include
receivables from sale and lease of properties and other services. Loans receivable included in other non-
current assets normally carry interest at rates with reference to prevailing market interest rate and are secured
by collaterals. The Group carry out regular reviews and follow-up actions on any overdue amounts to minimise
exposures to credit risk. There is no concentration of credit risk with respect to trade debtors from third party
customers as the customer bases are widely dispersed in different sectors and industries.
In addition, the Group monitors the exposure to credit risk in respect of the financial assistance provided to
subsidiaries, joint ventures and associated companies through exercising control, joint control or significant
influence over their financial and operating policy decisions and reviewing their financial positions on a regular
basis. Investment in debt securities are limited to financial institutions or investment counterparty with high
quality.
The Group provides guarantees to banks in connection with certain property purchasers’ borrowing of
mortgage loans to finance their purchase of the properties until the issuance of the official property title
transfer certificates by the relevant authority in the Mainland China. If a purchaser defaults on the payment of
its mortgage during the term of the guarantee, the bank holding the mortgage may demand the Group to repay
the outstanding amount under the loan and any accrued interest thereon. Under such circumstances, the
Group is able to retain the purchaser’s deposit and sell the property to recover any amounts paid by the Group
to the bank. Therefore the Group’s credit risk is significantly reduced. Nevertheless, the net realisable values
of the relevant properties are subject to the fluctuation of the property market in general, the Group assesses
at the end of each reporting period the liabilities based on the current estimates of future cash flows. As at
30 June 2015 and 2014, no provision on the above guarantees to banks had been made in the consolidated
financial statements.
(c) Liquidity risk
Prudent liquidity risk management includes managing the profile of debt maturities and funding sources,
maintaining sufficient cash and marketable securities, and ensuring the availability of funding from an
adequate amount of committed credit facilities and the ability to close out market positions. It is the policy
of the Group to regularly monitor current and expected liquidity requirements and to ensure that adequate
funding is available for operating, investing and financing activities. The Group also maintain adequate undrawn
committed credit facilities to further reduce liquidity risk in meeting funding requirements.
The table below analyses the Group’s non-derivative financial liabilities into relevant maturity groupings based
on the remaining period at the end of the reporting period to the contractual maturity dates. The amounts
disclosed in the table are the contractual undiscounted cash flows.
