D-Link 2014 Annual Report Download - page 84

Download and view the complete annual report

Please find page 84 of the 2014 D-Link annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 92

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92

56
D-LINK CORPORATION AND SUBSIDIARIES
Notes to the consolidated financial statements
(Continued)
(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 $2,847,774 thousands as of December 31,
2014.
(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 (TWD) 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, TWD, 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.
At any point in time, the Consolidated Company hedges its currency risk based on its actual
and forecast sales over the following six months. The Consolidated Company also uses
nature hedges on assets and liabilities denominated in foreign currencies and maintained
the hedge ratio at 50% and above. The Consolidated Company uses forward exchange
contracts and foreign-exchange options, with a maturity of less than one year from the
reporting date, to hedge its currency risks.
Generally, the currencies of loans in the Consolidated Company are denominated in its
functional currencies and are incorporated in net exposure on loan requirement
denominated in foreign currencies as mentioned above to ensure the net exposure is
maintained at acceptable level.