Annual Report 2011/12 - International Entertainment Corporation

Notes to the Consolidated Financial StatementsFor the year ended 31 March 20126. FINANCIAL INSTRUMENTS (Continued)(b) Financial risk management objectives and policies (Continued)Market risk (Continued)Other price riskFor the year ended 31 March 2012 and 2011, the Group is exposed to price risk through its financial assets atFVTPL in respect of debt securities and perpetual subordinated capital securities listed in overseas. Managementof the Group has performed analysis of the nature of market risk associated with the investments, includingdiscussion with the investment advisors, and concluded that the price risk is more prominent in evaluating themarket risk of this kind of investments. Management of the Group monitors this exposure and will considerhedging the price risk exposure should the need arise.Sensitivity analysis on financial assets/liabilities at FVTPLThe sensitivity analysis below have been determined based on the exposure to debt securities and perpetualsubordinated capital securities price risk (including fair value interest rate risk) arising from financial assets atFVTPL as at 31 March 2012. If the prices of respective financial instruments had been 10% higher/lower, theGroup’s post-tax profit would increase/decrease by approximately HK$6,734,000 (2011: HK$9,534,000) asa result of the change in fair value of financial assets at FVTPL as at 31 March 2012. Sensitivity analysis forcontingent consideration is not performed as the Directors considered that the fair value measurement of thecontingent consideration is unlikely to change in view of the weighted average of all possible outcomes.Credit riskThe Group’s maximum exposure to credit risk in the event of the counterparties failure to perform their obligations asat 31 March 2012 in relation to each class of recognised financial assets is the carrying amount of those assets asstated in the consolidated statement of financial position. In order to minimise the credit risk, management of theGroup has monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition,management of the Group reviews the recoverable amount of each individual trade receivable and loan receivableat the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts.In this regard, the Directors consider that the Group’s credit risk is significantly reduced.The credit risk on bank balances is limited because the counterparties are banks with credit-ratings assigned byinternational credit-rating agencies.At 31 March 2012, the Group had concentration of credit risk in respect of trade receivable from PAGCOR ofapproximately HK$64,217,000 (2011: HK$31,612,000). The credit risk on trade receivable from PAGCOR islimited as PAGCOR is solely owned by the Philippine government and with a good repayment history. The tradereceivable from PAGCOR as at 31 March 2012 was fully settled subsequent to the end of the reporting period.At 31 March 2012, the Group also had concentration of credit risk in respect of loan receivable, of approximatelyHK$73,916,000, details of which are set out in note 22. Before participating in the credit facility made availableto an independent third party of the Group (the “Borrower”), management of the Group has assessed thecredit quality of the Borrower as well as the value of the assets pledged to secure the credit facility. In order tominimise the credit risk, management of the Group has reviewed the recoverable amount of the loan receivableto ensure that adequate impairment losses are made for irrecoverable amount. The Directors do not expect thesecounterparties would fail to meet their obligations and the credit risk is significantly reduced. Other than above,the Group does not have any other significant concentration of credit risk, with exposure spread over a numberof counterparties.52International Entertainment Corporation - Annual Report 2011/12