PT SUMMARECON AGUNG Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2016 unaudited and December 31, 2015 audited and For the period of six months ended June 30, 2016 and 2015 unaudited
Expressed in thousands of Indonesian Rupiah, unless otherwise stated
80
35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTINUED
b Commodity price risk The Group’s exposures to commodity price risk relates primarily to the purchase of major building materials, such
as iron, steel, paint and cement. Before this happens, the Group enters into contracts with its suppliers that bind them to a fixed price, quantity and period of delivery based on the needs of the Group.
The Group’s policy is to minimize the risks arising from the fluctuations in commodity prices by maintaining the stability level of development costs, besides profit for the year that should be achieved by the Group.
c Interest rate risk The Group’s interest rate risk mainly arises from loans for working capital and investment purposes. Loans at
variable rates expose the Group to fair value interest rate risk. The Group manages its interest rate risk by obtaining loans with a mixture of fixed and floating interest rates.
d Credit risk
The Group is exposed to credit risk arising from the credit granted to its customers and tenants. To mitigate this risk, receivable balances are monitored on an ongoing basis to reduce the exposure to bad debts.
When a customer fails to make payment for the property purchased, the Group is not going to hand over to the customer the title to the property. As for the tenant whose payment is in arrears, the tenant’s security deposit will be
closely monitored. Before the arrears become greater than the security deposit, necessary action should be made, such as termination of rental agreement and rescheduling of payment. The Group’s management is of the opinion
that there are no significant concentrated risks on trade receivables. With respect to credit risk arising from the cash in banks and cash equivalents, the Group’s exposure to credit risk
arises from default of the counterparty. The Group has a policy not to place its funds in investments that have high credit risks and put its cash only in banks with good reputation.
The table below shows the maximum exposure to credit risk on the components of the consolidated statement of financial position as of June 30, 2016:
Maximum Exposure Loans and receivables:
Bank and cash equivalents 1,933,515,400
Trade receivables
242,938,538 Other
receivables 12,514,913
Other current financial assets 102,488
Other non-current financial assets 158,446,852
Total 2,347,518,191
e Liquidity risk
The Group manages its liquidity profile to be able to finance its capital expenditure and service its maturing debts by maintaining sufficient cash and the availability of funding through an adequate amount of committed credit
facilities.
The Group regularly evaluates its projected and actual cash flow information and continuously maintains its payable and receivable day’s stability.
Wherever possible, the Group obtains financing from the capital market and financial institutions and for portfolio balances with short-term financing to achieve efficiency in financing.
PT SUMMARECON AGUNG Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2016 unaudited and December 31, 2015 audited and For the period of six months ended June 30, 2016 and 2015 unaudited
Expressed in thousands of Indonesian Rupiah, unless otherwise stated
81
35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTINUED
