Singapore Airlines 2014 Annual Report Download - page 200
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198
NOTES TO THE FINANCIAL STATEMENTS
31 March 2014
SINGAPORE AIRLINES
38 FinancialRiskManagementObjectivesandPolicies(in$million)(continued)
(f) Credit risk
The Group has an independent Group Debts Review Committee to review the follow up actions on outstanding
receivables monthly. On a day-to-day basis, the respective Finance divisions have the primary responsibility for
measuring and managing specific risk exposures.
The maximum exposure to credit risk for the Group and the Company is represented by the carrying amount of each
financial asset in the statement of financial position.
There are no significant concentrations of credit risk other than on derivative counterparties where transactions are
limited to financial institutions possessing high credit quality and hence the risk of default is low.
The sale of passenger and cargo transportation is largely achieved through IATA accredited sales agents. The credit risk
of such sales agents is relatively small owing to a broad diversification. In specific instances, the contract may require
special collateral.
Unless expressly stated otherwise in the contract, receivables and payables among airlines are settled either bilaterally
or via the IATA Clearing House. Receivables and payables are generally netted and settled at weekly intervals, which
lead to a clear reduction in the risk of default.
For all other service relationships, depending on the nature and scope of the services rendered, collateral is required,
credit reports or references are obtained and use is made of historical data from previous business relations, especially
with regard to payment behaviour, in order to avoid non-performance.
Collaterals requested from debtors include bank guarantees, cash-in-lieu of deposit and security deposits.
Allowance is made for doubtful accounts whenever risks are identified.
(g) Counterparty risk
Counterparty risk is the potential financial loss from a transaction that may arise in the event of default by the
counterparty. Counterparty risks are managed by limiting aggregated exposure on all outstanding financial
instruments to any individual counterparty, taking into account its credit rating. Such counterparty exposures are
regularly reviewed, and adjusted as necessary. This mitigates the risk of material loss arising from the event of non-
performance by counterparties.
Surplus funds are invested in interest-bearing bank deposits and other high quality short-term liquid investments.