TPSEAL 2010 Financial Results. - Serena Hotels

Notes to the Financial Statements (continued)
4 Financial risk management (continued)
(ii) Price risk
The Group has invested in the unquoted shares of Tourism Promotion Services (Rwanda) Limited which have been classified
under Available-for-sale financial assets. In the opinion of the directors, there is no material exposure to price risk.
(iii) Cash flow and fair value interest rate risk
The Group has borrowings at variable rates. The Group does not hedge itself against interest rate risk. No limits are placed on
the ratio of variable rate borrowing to fixed rate borrowing. At 31 December 2010, an increase/decrease of 2% on interest rate
would have resulted in an increase/decrease in consolidated post tax profit of Shs 1,040,081 (2009: 3,146,987).
Credit risk
Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions as well as credit exposures
to customers, including outstanding receivables and committed transactions. Credit risk is the risk that a counterparty will
default on its contractual obligations resulting in financial loss to the Group.
The credit controller is responsible for managing and analysing credit risk for each new customer before standard payment and
delivery terms are offered. Credit risk arises from cash at bank and short term deposits with banks, as well as trade and other
receivables. The Group does not have any significant concentrations of credit risk.
For banks and financial institutions, only reputable well established financial institutions are accepted. For trade receivables,
the credit controller assesses the credit quality of the customer, taking into account its financial position, past experience and
other factors. The Group does not grade the credit quality of receivables. Individual risk limits are set based on internal ratings
in accordance with limits set by the Board. The utilisation of credit limits is regularly monitored.
The amount that best represents the Group’s and Company’s maximum exposure to credit risk at 31 December 2010 and 2009
is made up as follows:
Group
Company
2010 2009 2010 2009
Shs’000 Shs’000 Shs’000 Shs’000
Cash equivalents 1,040,317 339,869 723,540 -
Trade receivables 744,084 534,447 - -
Receivables from related companies 99,001 222,704 72,403 169,455
Other receivables 105,318 105,267 7,001 1,518
1,988,720 1,202,287 802,944 170,973
No collateral is held for any of the above assets. Receivables that are neither past due or impaired are within their approved
credit limits, and no receivables have had their terms renegotiated.
56 TPS EASTERN AFRICA LIMITED ANNUAL REPORT AND FINANCIAL STATEMENTS 2010