10. Financial Instruments - Risk Management
|12 Months Ended|
Dec. 31, 2018
|Financial Instruments - Risk Management|
|Financial Instruments - Risk Management||
Note 10 – Financial Instruments – Risk Management
The Group, through its subsidiaries, is exposed to the following financial risks through its operations:
The Group is exposed to risks that arise from its use of financial instruments. This note describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these consolidated financial statements.
There have been no substantive changes in the Group’s exposure to financial instruments risks, its objectives, policies and processes for managing those risks or the methods used to measure them during the period unless otherwise stated in this note.
i. Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
A summary of the financial instruments held by category is provided below:
Financial instruments measured at fair value
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies.
The overall objective of the Board is to set policies that seek to reduce risk as much as possible without unduly affecting the Group’s competitiveness and flexibility. Further details regarding these policies are set out below:
Risk related to the general economic trend
The Group performance is affected by the increase or decrease of the gross Italian national product. Europe experienced a general slowdown in its economy, especially in Italy during 2014 and 2015, with a slight improvement in the economic trend in Italy during 2016 and continued positive trend in 2017. The economic growth has, however, slowed down in 2018.
Related to fund requirements
Operations may not generate adequate financial resources for operations. The Group may need to raise necessary financial resources by obtaining new loans. If the Group attempts to obtain new loans in the future, management believes that the Group may encounter higher interest rate spreads and greater difficulties in obtaining long-term loans in comparison to the past.
Other financial risks
The Group is exposed to financial risks associated with its business operations:
The granting of credit to end customers is subject to specific preliminary and on-going assessments of each tenant. Positions amongst trade receivables (if individually significant) for which objective partial or total non-recoverability is ascertained, are subject to individual write-down.
The Group’s cash is held with the following institutions:
Accounts at the institutions in United States are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000. Accounts at the institutions in Italy are guaranteed by Interbank Deposit Protection Fund for up to €100,000. The Company performs ongoing evaluations of these institutions to limit its concentration of risk exposure.
Foreign exchange risk
The Subsidiaries transactions are denominated in Euros. Therefore, the fair value of the investment properties may decrease if the Euro to US dollar exchange rate decreases, while the loans and borrowings would decrease accordingly. Management believes the foreign exchange risk the Group encounters is relatively low.
Liquidity risk may manifest with regards to the inability to raise the financial resources necessary for the anticipated investments under good economic conditions and for financing working capital.
The Group has adopted a series of policies and processes aimed at optimizing the management of the financial resources, reducing the liquidity risk, such as the maintenance of an adequate level of available liquidity, and obtaining adequate credit facilities and the systematic monitoring of the forecast liquidity conditions.
The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of financial liabilities:
Risk relevant to the environment
The activities of the Group are not directly subject to authorization and environmental rules and regulations. The activities of some tenants may be subject to regulations on emissions in the atmosphere, waste disposal, wastewater disposal and land contamination ban.
The Group monitors adjusted capital which comprises all components of equity (i.e. capital quotas, legal reserve, non-controlling interest and retained earnings).
The Group’s objectives when maintaining capital are:
The entire disclosure for financial instruments.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef