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Notes to the Financial Statements
26. Capital and financial risk management (Cont'd)
Financial risk management (Cont'd)
Credit risk
While it is necessary to assume a certain level of tenant credit risks to remain competitive in China, the Group
has established credit limits for tenants and monitors their balances on an ongoing basis. Risks associated with
credit limits are reflected in the level of security deposits and bank guarantees placed as collateral in respect of
the leases. Appropriate risk mitigating actions are in place to manage trade receivables.
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of
trade and other receivables. The main components of this allowance are a specific loss component that relates
to individually significant exposures, and a collective loss component established for groups of similar assets
in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined
based on historical data of payment statistics for similar financial assets.
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 banks and financial institutions which are regulated.
Liquidity risk
The Group monitors its liquidity risk 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 reasonable
period, including the servicing of financial obligations.
In addition, the Group maintains the following debt facilities:
• the RMB115.2 million three-year unsecured term loan facility
• the $88.0 million three-year trust term loan facility
• the $100.5 million three-year trust term loan facility
• the $50.0 million three-year trust term loan facility
• the $100.0 million four-year trust term loan facility
• the $50.0 million four-year trust term loan facility
• the $151.0 million money market facilities
• the US$50.0 million money market facility
• the $500.0 million multicurrency Medium Term Note (“MTN”) programme
CapitaRETAIL china trust | Report to UNITHOLDERS 2012 125