Page 53 - Bauxite Resources Annual Report 2013

Notes to the Financial Statements cont.
(b) Credit risk
Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract
obligations that could lead to a financial loss to the Group.
Credit risk is managed through the maintenance of procedures (such procedures include the utilisation of systems for the
approval, granting and renewal of credit limits, regular monitoring of exposures against such limits and monitoring of the
financial stability of significant customers and counterparties), ensuring to the extent possible, that customers and counterparties
to transactions are of sound credit worthiness. Such monitoring is used in assessing receivables for impairment. The Group has a
concentration of credit risk with one external entity which currently makes up 55.60% (2012: 89.7%) of the receivables balance.
Risk is also minimised through investing surplus funds in financial institutions that maintain a high credit rating, or in entities
that the FRMC has otherwise cleared as being financially sound. Where the Group is unable to ascertain a satisfactory credit risk
profile in relation to a customer or counterparty, the risk may be further managed through title retention clauses over goods or
obtaining security by way of personal or commercial guarantees over assets of sufficient value which can be claimed against in
the event of any default.
(c) Liquidity risk
The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and ensuring sufficient cash and
marketable securities are available to meet the current and future commitments of the Group. Due to the nature of the Group’s
activities, being mineral exploration, the Group does not have ready access to credit facilities, with the primary source of funding
being equity raisings. The Board of Directors constantly monitor the state of equity markets in conjunction with the Group’s
current and future funding requirements, with a view to initiating appropriate capital raisings as required.
The financial liabilities of the Group and the parent entity are confined to trade and other payables as disclosed in the Balance
Sheet. All trade and other payables are non-interest bearing and due within 12 months of the balance sheet date.
(d) Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure
purposes. All financial assets and financial liabilities of the Group and the parent entity at the balance date are recorded at
amounts approximating their carrying amount.
The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. The
quoted market price used for financial assets held by the Group is the current bid price.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due
to their short-term nature.
Annual Report 2013 Bauxite Resources 51