FY 2011 Annual Report - Sheng Siong

70 Sheng Siong Annual Report 2011
Notes to the Financial Statements
24 Related parties (Continued)
Other related party transactions
Other than disclosed elsewhere in the financial statements, transactions carried out with related parties in the
normal course of business on terms agreed between the parties are as follows:
2011 2010
$’000 $’000
Corporations in which directors of the Company have
substantial financial interests
– Sales 1,143 1,783
– Purchases (550) (533)
– Rental expenses (1,095) (898)
– Rental income 320 569
– Ration income 19 80
– Sub contract labour income 44 266
– Sub contract labour expenses (84) (925)
25 Financial risk management
Overview
The Group operates only in Singapore but sources its supplies worldwide and is exposed to a variety of
financial risks, comprising market risk like currency and interest rate risk, credit risk and liquidity risk. There
are controls in place to ensure an acceptable balance between the cost or return of unhedged risks and the
cost of hedging the risks. Risk management policies and systems are reviewed regularly to reflect changes in
market conditions and the Group’s activities.
Credit risk
Credit risk is the potential financial loss resulting from the failure of a customer or a counterparty to settle its
financial and contractual obligations to the Group, as and when they fall due.
The Group’s exposure to credit risk arises mainly from cash and cash equivalents. The Group sales are done
mainly on a cash basis and trade receivables are insignificant. Balances due from affiliated companies accounted
for only 0.5% of the total loans and receivables as at 31 December 2011 (2010: 4.9%), and there are controls
in place to ensure that they are collected on a timely basis and in accordance within the credit terms (for trade
balances). The carrying amount of these financial assets recorded in the balance sheet represents the Group’s
maximum exposure to credit risk.
Cash and fixed deposits are placed with banks which are regulated under the Singapore Banking Act.
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.