Creative 2010 Annual Report Download - page 56

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56
CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES
Prot and Loss
10% 10%
strengthened weakened
US$’000 US$’000
Group
2010
S$ against US$ 15,306 (15,306)
Euro against US$ 2,063 (2,063)
GBP against US$ 672 (672)
Others against US$ 2,014 (2,014)
2009
S$ against US$ 8,873 (8,873)
Euro against US$ 6,321 (6,321)
GBP against US$ 3,212 (3,212)
Others against US$ 3,321 (3,321)
(b) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in nancial loss to the
Group. Financial instruments that potentially subject the Group to signicant concentrations of credit risk consist principally
of cash and cash equivalents and trade receivables. The Group deals only with nancial institutions with high credit
ratings and limits the amount of credit exposure to any one nancial institution. The Group sells its products to original
equipment manufacturers, distributors and key retailers. The Group believes that the concentration of credit risk in its trade
receivables is substantially mitigated due to performance of ongoing credit evaluations of its customers’ nancial condition,
use of short collection terms, use of letters of credit in certain circumstances, procurement of credit insurance coverage and
the geographical dispersion of sales. The Group establishes allowances for doubtful accounts, returns and discounts for
specically identied doubtful accounts, returns and discounts based on credit proles of its customers, current economic
trends, contractual terms and conditions and historical payment, returns and discount experience.
The maximum exposure to credit risk for each class of nancial instruments is the carrying amount of that class of nancial
instruments presented on the balance sheet.
As at 30 June 2010, there were no signicant concentrations of credit risk and no customer (2009: Nil) individually accounted
for 10% or more of net accounts receivable.
Bank deposits that are neither past due nor impaired are mainly deposits with banks with high credit-ratings assigned by
international credit-rating agencies. Trade receivables that are neither past due nor impaired are substantially companies
with a good collection track record with the Group.
There is no other class of nancial assets that is past due and/or impaired except for trade receivables.
notes to tHe fInAncIAl stAteMents
– For the nancial year ended 30 June 2010
29. FINANCIAL RISK MANAGEMENT (cont’d)