DESTINI Annual Report 2019

NOTES TO THE FINANCIAL STATEMENTS 42. Financial Instruments (Cont’d) (c) Financial risk management objectives and policies (Cont’d) (i) Credit risk (Cont’d) The carrying amounts of the financial assets recorded on the statements of financial position at the end of the financial year represent the Group’s and the Company’s maximum exposure to credit risk except for financial guarantees provided to banks for banking facilities granted to certain subsidiaries. The Company’s maximum exposure in this respect is RM111,916,489 (2018: RM111,916,489), representing the outstanding banking facilities of the subsidiaries as at the end of the reporting period. There was no indication that any subsidiary would default on repayment as at the end of the reporting period. Financial guarantee The Group provides secured bankers’ guarantee in favour of the local authorities for purpose of securing development projects. The maximum exposure of credit risk amounted to RM39,029,334 (2018: RM40,988,359). There was no indication that the guarantee will be called upon. Intercompany loan advances The Company provides unsecured loans and advances to subsidiaries. The Company monitors the results of the subsidiaries regularly. As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statements of financial position. As at the end of the reporting period, there was no indication that the loans and advances to the subsidiaries are not recoverable. The Company does not specifically monitor the ageing of current advances to the subsidiaries. (ii) Liquidity risk Liquidity risk refers to the risk that the Group or the Company will encounter difficulty in meeting its financial obligations as they fall due. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group’s and the Company’s funding requirements and liquidity risk is managed with the objective of meeting business obligations on a timely basis. The Group and the Company finance their liquidity through internally generated cash flows and minimises liquidity risk by keeping committed credit lines available. FINANCIAL STATEMENTS 06 ANNUAL REPORT 2019 189