CAHYA MATA SARAWAK ANNUAL REPORT 2016

www.cmsb .com.my Cahya Mata Sarawak Berhad 184 Section 07 Financial StatementS NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2016 40. FAIR VALUE MEASUREMENTS (CONT'D.) (c) Fair values of financial instruments not carried at fair value (cont'd.) The following are classes of financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair values: Note Trade receivables 24 Other receivables 24 Loans and borrowings (excluding term loans and shareholders’ loan) 30 Trade payables 31 Other payables 31 The carrying amounts of these financial assets and liabilities are reasonable approximation of fair values, either due to their short-term nature or that they are floating rate instruments that are re-priced to market interest rates on or near the reporting date or that they are carried at their amortised carrying value. The fair values of these financial instruments are estimated by discounting expected future cash flows at market incremental lending rate for similar types of lending, borrowing or leasing arrangements at the reporting date. 41. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group and the Company are exposed to financial risks arising from their operations and the use of financial instruments. The Group’s overall risk management strategy seeks to minimise potential adverse effects on the financial performance of the Group. The key financial risks include credit risk, liquidity risk and market risk. Financial risk management policies are reviewed and approved by the Board of Directors and executed by the management of the respective operating units. The Group Risk Committee provides independent oversight on the effectiveness of the risk management process. The following sections provide details regarding the Group’s and Company’s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks. (a) Credit risk Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. At the reporting date, the Group’s exposure to credit risk arises primarily from trade and other receivables. The Company’s exposure to credit risk arises principally from loans and advances to subsidiaries and financial guarantees given to banks for credit facilities granted to subsidiaries and an associate.