Asus 2011 Annual Report Download - page 133
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129
B. Credit risk
(A) Credit risk means the potential loss of the Company if the counterparty involved in that
transaction defaults. Since the Company’s derivative financial instrument agreements are
entered into with international financial institutions with good credit ratings, management
believes that there is no significant credit risk from these transactions.
(B) The primary potential credit risk is from financial instruments like cash, bank deposits,
equity securities under non-equity method, and accounts receivable. The Company
deposits cash in different financial institutions. Equity securities under non-equity method
were funds and listed and OTC stocks issued by companies with good credit ratings. The
Company manages credit risk exposure related to each financial institution and believes
that there is no significant concentration of credit risk of cash and equity securities. The
customers of the Company have good credit and profit records. The Company evaluates
the financial condition of these customers in order to reduce credit risk of accounts
receivable.
C. Liquidity risk
(A) The Company adjusts its funding mainly through corporate bonds, cash and bank deposits.
The Company maintains funding sufficient to fulfill all contract obligations, and thereby
expects no significant liquidity risk would arise from lack of funding.
(B) The Company invests in funds and listed and OTC stocks, which are traded in active
markets and are expected to be readily converted into certain amount of cash approximate
to their fair values in the market. The Company has lower funding risk for forward
exchange contracts and currency option contracts because sufficient working capital is
maintained to fulfill contract obligations, and lower cash flow risk as the exchange rate of
those contracts was known.
(C) The Company is expected to have liquidity risk since investments in equity instruments
carried at cost have no active market.