Sun Art Retail Group Limited - TodayIR.com

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 22 CAPITAL, RESERVES AND DIVIDENDS (CONTINUED) (f) Capital risk management (continued) The debt-to-equity ratios were as follows: At 31 December 2012 2011 RMB million RMB million Loans and borrowings (note 19) 402 199 Other financial liabilities (note 20) 85 85 487 284 Less: Time deposits (105) (67) Cash and cash equivalents (5,757) (7,517) Available-for-sale financial assets (1,965) – Net asset (7,340) (7,300) Total equity 17,358 15,517 Asset-to-equity ratio 42% 47% Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. 23 FINANCIAL RISK MANAGEMENT AND FAIR VALUE Financial assets of the Group include cash and cash equivalents, time deposits, available-for-sale financial assets and trade and other receivables. Financial liabilities of the Group include loans and borrowings and trade and other payables. The Company’s board of directors (the “Board”) has overall responsibility for the establishment and oversight of the Group’s risk management framework, and developing and monitoring the Group’s risk management policies. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The risks are mitigated by various measures as disclosed below. Sun Art Retail Group Limited Annual Report 2012 99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 23 FINANCIAL RISK MANAGEMENT AND FAIR VALUE (CONTINUED) (a) Credit risk The Group’s cash and bank deposits are held with banks located in the PRC and Hong Kong which management believes are of high credit quality. Accordingly, the Group’s credit risk is primarily attributable to trade and other receivables. Management monitors the exposures to credit risk on an ongoing basis. Credit risk in respect of trade receivables is limited as the balances mainly arise from credit card sales. Credit terms are offered in rare cases to corporate customers with whom the Group has an established and ongoing relationship. Available-for-sale financial assets are arranged with financial institutions, which have credit rating of at least BBB from international independent rating institutions. Pursuant to the agreements with the financial institutions, there is limited credit risk on the principal amounts, as these are guaranteed by the financial institutions. Rental prepayments are placed with various landlords in the PRC and may be offset against future rental charges during the lease periods. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the consolidated statement of financial position. The Group or the Company does not provide any other guarantees which would expose the Group or the Company to credit risk. (b) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. 100 Sun Art Retail Group Limited Annual Report 2012
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