D-Link 2013 Annual Report Download - page 78
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D-LINK CORPORATION AND SUBSIDIARIES
Notes to the consolidated financial statements
(Continued)
credit ratings as its counterparties and diversify its investment in different financial
institutions, and do not expect to have any default risks and significant concentration of
credit risk.
(iii) Guarantees
Pursuant to the Consolidated Company’s policies, it is only permissible to provide financial
guarantees to subsidiaries. As of December 31, 2013, and December 31, and January 1,
2012, the Consolidated Company has not provide any guarantees to a third party.
(4) Liquidity risk
Liquidity risk is the risk that the Consolidated Company will encounter difficulty in meeting the
obligations associated with its financial liabilities that are settled by delivering cash or another
financial asset. The Consolidated Company’s approach to manage liquidity is to ensure, as far
as possible, that it always have sufficient liquidity to meet its liabilities when due, under both
normal and stressed conditions, without incurring unacceptable losses or risking damage to the
Consolidated Company’s reputation. The Consolidated Company aims to maintain the level of
its cash and short term bank facilities at an amount in excess of expected cash flows on financial
liabilities over the succeeding 60 days. This excludes the potential impact of extreme
circumstances that cannot reasonably be predicted, such as natural disasters. The Consolidated
Company has unused short term bank facilities for $5,201,921 thousands as of December 31,
2013.
(5) Market risk
Market risk is the risk that changes in market prices, such as changes in foreign exchange rates,
interest rates or equity prices that affects the Consolidated Company's income or the value of its
holdings of financial instruments. The objective of market risk management is to manage and
control market risk exposures within acceptable parameters to minimize the influence on change
in market price or control within expectable scope.
The Consolidated Company buys and sells derivatives, and also incurs financial liabilities, in
order to manage market risks. All such transactions are carried out within the guidelines of risk
management.
(i) Currency risk
The Consolidated Company is exposed to currency risk on sales, purchases and loans that
are denominated in currencies other than its respective functional currencies. The
functional currencies of the Consolidated Company are primarily denominated in New
Taiwan Dollars (NTD) and US Dollars (USD) and include denominated in Euro (EUR),
Chinese Yuan (CNY), Japanese Yen (JPY) and Brazilian Real (BRL) of other countries in
which the subsidiaries registered. Purchases are mainly denominated in USD while sales
are denominated in USD, EUR, CNY, NTD, British Pounds (GBP), Australian Dollar
(AUD), Canadian Dollar (CAD), JPY, South Korean Won (KRW), Russian Ruble (RUB),
Indian Rupee (INR), BRL, Mexican Peso(MXN) and other currencies.