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84<br />
Next Media Limited annual report 06 07<br />
6. FINANCIAL INSTRUMENTS (<strong>co</strong>ntinued)<br />
a. Financial risk management objectives and policies (<strong>co</strong>ntinued)<br />
Credit risk<br />
The Company<br />
Notes to the Consolidated Financial Statements (<strong>co</strong>ntinued)<br />
As at 31 M<strong>ar</strong>ch 2007, the Company’s maximum exposure to credit risk which will cause a fi nancial loss to the Group due to failure to disch<strong>ar</strong>ge an obligation by the<br />
<strong>co</strong>unterp<strong>ar</strong>ties and fi nancial gu<strong>ar</strong>antees is issued by the Company’s <strong>ar</strong>ising from:<br />
the c<strong>ar</strong>rying amount of the respective re<strong>co</strong>gnised fi nancial assets as stated in the balance sheet; and<br />
the amount of <strong>co</strong>ntingent liabilities disclosed in note 34(c).<br />
The Company’s <strong>co</strong>ncentration of credit risk is on amounts due from subsidi<strong>ar</strong>ies.<br />
The Group<br />
As at 31 M<strong>ar</strong>ch 2007, the Group’s maximum exposure to credit risk which will cause a fi nancial loss to the Company due to failure to disch<strong>ar</strong>ge an obligation by the<br />
<strong>co</strong>unterp<strong>ar</strong>ties issued by the Group <strong>ar</strong>ising from the c<strong>ar</strong>rying amount of the respective re<strong>co</strong>gnised fi nancial assets as stated in the Group’s <strong>co</strong>nsolidated balance sheet.<br />
In order to minimise the credit risk, the management of the Group and the Company has delegated a team responsible for determination of credit limits, credit<br />
approvals and other monitoring procedures to ensure that follow-up action is taken to re<strong><strong>co</strong>ver</strong> overdue debts. In addition, the Group and the Company reviews the<br />
re<strong><strong>co</strong>ver</strong>able amount of each individual trade debt at each balance sheet date to ensure that adequate impairment losses <strong>ar</strong>e made for irre<strong><strong>co</strong>ver</strong>able amounts. In this<br />
reg<strong>ar</strong>d, the Directors of the Company <strong>co</strong>nsider that the Group’s credit risk is signifi cantly reduced.<br />
The credit risk on the Group and the Company’s bank balances is limited because the <strong>co</strong>unterp<strong>ar</strong>ties <strong>ar</strong>e banks with high credit ratings assigned by international creditrating<br />
agencies.<br />
The Group has no signifi cant <strong>co</strong>ncentration of credit risk, with exposure spread over a number of <strong>co</strong>unterp<strong>ar</strong>ties and customers.<br />
b. Fair value<br />
The fair value of fi nancial assets and fi nancial liabilities <strong>ar</strong>e determined as follows:<br />
the fair value of fi nancial assets and fi nancial liabilities (excluding derivative instruments) <strong>ar</strong>e determined in ac<strong>co</strong>rdance with generally accepted pricing models<br />
based on dis<strong>co</strong>unted cash fl ow analysis; and<br />
the fair value of derivative instruments <strong>ar</strong>e obtained from fi nancial institutions which <strong>ar</strong>e determined with reference to estimated cash fl ows with appr<strong>op</strong>riate yield<br />
curve for equivalent instruments at balance sheet date.<br />
The Directors <strong>co</strong>nsider that the c<strong>ar</strong>rying amounts of fi nancial assets and fi nancial liabilities measured at amortised <strong>co</strong>st in the <strong>co</strong>nsolidated fi nancial statements<br />
approximates their fair value.
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