2011 Annual Report - the solid group inc website

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Exposures to foreign exchange rates vary during the year depending on the volume of
overseas transactions. Nonetheless, the analysis above is considered to be representative of
the Group’s foreign currency risk.
31.2 Interest Rate Sensitivity
At December 31, 2011, 2010 and 2009, the Group is exposed to changes in market interest
rates through its cash and cash equivalents, which are subject to variable interest rates
(see Note 6).
The following illustrates the sensitivity of profit before tax for the year to a reasonably
possible change in interest rates of +/-1.17% in 2011, +/-1.19% in 2010 and +/-7.21% in
2009. These changes in rates have been determined based on the average market volatility
in interest rates, using standard deviation, in the previous 12 months, estimated at 99%
level of confidence. The sensitivity analysis is based on the Group’s financial instruments
held at each reporting date, with effect estimated from the beginning of the year. All other
variables held constant, if the interest rate increased by 1.17%, 1.19% and 7.21%, profit
before tax in 2011, 2010 and 2009 would have increased by P14.1 million, P13.2 million,
and P68.1 million, respectively. Conversely, if the interest rate decreased by the same
percentages, profit before tax would have been lower by the same amounts.
31.3 Credit Risk
Generally, the maximum credit risk exposure of financial assets is the carrying amount of
the financial assets as shown in the consolidated statements of financial position (or in the
detailed analysis provided in the notes to the consolidated financial statements), as
summarized below:
Notes 2011 2010 2009
Cash and cash equivalents 6 P 1,720,748,062 P 1,620,114,468 P 1,263,142,145
Trade and other receivables - net 7 1,807,037,835 1,531,894,847 1,181,048,096
Financial assets at FVTPL 8 70,272,991 - -
AFS financial assets - net 9 51,994,367 150,712,680 313,805,880
Advances to related parties 28 128,543,399 201,193,407 504,328,415
Refundable deposits - net 15 13,205,036 12,386,030 13,075,903
P 3,791,801,690 P 3,516,301,432 P 3,275,400,439
The Group continuously monitors defaults of customers and other counterparties,
identified either individually or by group, and incorporate this information into its credit
risk controls. Where available at a reasonable cost, external credit ratings and/or reports
and other counterparties are obtained and used. The Group’s policy is to deal only with
creditworthy counterparties. In addition, for a significant proportion of real estate sales,
advance payments are received to mitigate credit risk.
The Group’s management considers that all the above financial assets that are not impaired
or past due at the end of each reporting period are of good credit quality.
(a)
Cash and Cash Equivalents, FVTPL and AFS Financial Assets
The credit risk for cash and cash equivalents, FVTPL and AFS financial assets in the
consolidated statements of financial position, is considered negligible, since the
counterparties are reputable banks with high quality external credit ratings.