NOTES TO THE FINANCIAL STATEMENTS
For the Financial Year Ended 31 December 2014
39 CONTINGENT LIABILITIES
Company
2014
2013
$’000
$’000
Financial support given to those subsidiaries having:
– deficiencies in shareholders’ funds
5,244
2,829
– current liabilities in excess of current assets
529,910
214,754
40 FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks. Apart from those risks generated from operations such
as extending credits and cash flow management, other risks include the effects of changes in debt and equity market
prices, foreign currency exchange rates, interest rates and commodity prices.
The Group’s management monitors its financial position closely with an objective to minimise potential adverse effects
on the financial performance of the Group. The Group uses derivative financial instruments, where appropriate, for its
risk management activities but does not hold or issue derivative financial instruments for trading purposes. It is, and has
been throughout the current and previous financial year, the Group’s policy that no trading in derivatives for speculative
purposes shall be undertaken.
There has been no change to the Group’s exposure to these risks or the manner in which it manages the risks.
The policies for managing these risks are summarised below.
(a)
Foreign exchange risk
The Group operates mainly in Asia Pacific and has exposure to foreign exchange risk as a result of sales or purchase
transactions that are denominated in a currency other than the functional currencies of the respective Group
entities. These foreign exchange risk exposures are mainly in Australian Dollar, United States Dollar and Japanese
Yen. The Group uses forward currency contracts to manage these exposures where appropriate. The Group also
uses term loans in foreign currency to hedge its exposure to foreign exchange risk on investments in foreign
operations where appropriate.
142
THE STRAITS TRADING COMPANY LIMITED ANNUAL REPORT 2014
