Final Sameer Annual Report 2010 - Sameer Africa Limited

Notes to the consolidated financial statements
for the year ended 31 december 2010
• IFRS 9 Financial Instruments retains but simplifies the mixed measurement model and establishes two primary
measurement categories for financial assets: amortised costs and fair value. The basis for classification depends
on the entity’s business model and the contractual cash flow characteristics of the financial asset. The guidance
in IAS 39 on impairment of financial assets and hedge accounting continues to apply.
• IFRS 9 will become mandatory for the Group’s 2014 financial statements and is not expected to have a significant
effect on the financial statements.
4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POICIES
Overview
The Group has exposure to the following risks from its use of financial instruments:
(a) Credit risk;
(b) Liquidity risk; and
(c) Market risk.
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and
processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are
included throughout these consolidated financial statements.
The Board of Directors has overall responsibility for the establishment and oversight the Group’s risk management
framework. The finance department identifies, evaluates and hedges financial risks. The Board provides written principles
for overall risk management, as well as written policies covering specific areas such as foreign exchange risk, interest rate
risk, credit risk, use of derivative financial instruments and investing excess liquidity.
The Board of Directors oversees how management monitors compliance with the Company’s risk management policies
and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.
(a) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Group’s receivables from customers and investment securities.
Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics
of the Company’s customer base, including the default risk of the industry and country in which customers operate, has
less of an influence on credit risk.
The Group has established a credit policy under which each new customer is analysed individually for creditworthiness
before the Group’s standard payment and delivery terms and conditions are offered. Customers that fail to meet the
Group’s benchmark creditworthiness may transact with the Group only on a prepayment basis.
The Company has a stringent debt provisioning policy that represents its estimate of incurred losses in respect of trade
and other receivables and investments. The main component of this allowance of specific loss component that relates to
individually significant exposures.
The Group also manages the level of credit risk by focusing on customer satisfaction as a key performance indicator. It also
maintains a short credit period. Due to the nature of the Group’s activities, credit risk concentrations are high and as such
close monitoring of credit relationships is carried out.
X 30 SAMEER Annual Report 2010 2009