LensCrafters 2015 Annual Report Download - page 114

Notes to the consolidated financial statement as of December 31, 2015 Page 20 di 68
Credit risk
Credit risk exists in relation to accounts receivable, cash, financial instruments and deposits in banks and other financial
institutions.
Credit risk related to commercial counterparties
The credit risk related to commercial counterparties is locally managed and monitored by a group credit control department for
all entities included in the Wholesale distribution segment. Credit risk which originates within the retail segment is locally
managed by the companies included in the retail segment.
Losses on receivables are recorded in the financial statements if there are indicators that a specific risk exists or as soon as risks
of potential insolvency arise, by determining an adequate accrual for doubtful accounts.
The allowance for doubtful accounts used for the Wholesale segment and in accordance with the credit policy of the Group is
determined by assigning a rating to customers according to the following categories:
1 “GOOD” (active customers), for which no accrual for doubtful accounts is recorded for accounts receivable overdue
for less than 90 days. Beyond 90 days overdue a specific accrual is made in accordance with the customer’s credit
worthiness (customers “GOOD UNDER CONTROL”); and
1 “RISK” (no longer active customers), for which the outstanding accounts receivable are fully provided. The following
are examples of events that may fall into the definition of RISK:
a. Significant financial difficulties of the customers;
b. A material contract violation, such as a general breach or default in paying interest or principal;
c. The customer declares bankruptcy or is subject to other insolvency proceedings; and
d. All cases in which there is documented proof certifying the non-recoverability of the receivables (i.e., the
inability to trace the debtor, seizures).
Furthermore, the assessment of the losses incurred in previous years is taken into consideration in order to determine the
balance of the bad debt provision.
The Group does not have significant concentrations of credit risk. In any case, there are proper procedures in place to ensure
that the sales of products and services are made to reliable customers on the basis of their financial position as well as past
experience. Credit limits are defined according to internal and external evaluations that are based on thresholds approved by the
Board of Directors. The utilization of credit limits is regularly monitored through automated controls.
Moreover, the Group has entered into an agreement with an insurance company in order to cover the credit risk associated with
customers of Luxottica Trading and Finance Ltd. in those countries where the Group does not have a direct presence. Starting
from October 2015 the business in those countries was transferred among different entities within the Group. Until the time of
transfer, accounts receivable were regularly covered by the above-mentioned insurance. A new global insurance agreement has
not yet been finalized.
Credit risk related to the management of financial resources and cash availabilities
With regards to credit risk related to the management of financial resources and cash availabilities, the risk is managed and