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Annual Report 2010 Forth Corporation Public Company Limited
Credit risk The Company and its subsidiaries are exposed to credit risk primarily with respect to trade accounts receivable. The management manages the risk by adopting appropriate credit control policies to ensure that services are provided only to customers with a suitable credit history. However, the Company has a significant concentration of credit risk due to its exposure to a single major debtor and debtors of project work. This major debtor has honored all obligations and paid accounts in a timely manner, and debtors of project work are the authorities. For the subsidiaries, they have a large customer base. The Company and its subsidiaries’ management believe that such concentration of credit risk will have no material impact. The maximum exposure to credit risk is limited to the carrying amounts of trade account receivables as stated in the balance sheet. Interest rate risk The Company and its subsidiaries are exposed to interest rate risk primarily with respect to cash at banks, bank overdrafts, short-term loans and long-term borrowings. However, since most of the Company and its subsidiaries’ financial assets and liabilities bear floating interest rates or fixed interest rates which are close to the market rate, the interest rate risk is expected to be minimal. (The details of interest rates of cash at banks, bank overdrafts and loans are set out in Notes 6, 15 and 16 to the financial statements) Foreign currency risk The Company and its subsidiaries’ exposure to foreign currency risk arises mainly from trading transactions that are denominated in foreign currencies. The Company and its subsidiaries seek to reduce this risk by entering into forward exchange contracts when they consider appropriate. Generally, the forward contracts mature within one year. The balances of financial assets and liabilities denominated in foreign currencies as at 31 December 2010 are summarised below.
Foreign currency US dollar Hong Kong dollar Japanese yen
Financial assets (Million)
Financial liabilities (Million)
0.92 - -
7.56 0.77 49.35
Average exchange rate as at 31 December 2010 (Baht per 1 foreign currency unit) 30.1513 3.8742 0.3705
Forward exchange contracts outstanding at 31 December 2010 are summarised below:
Foreign currency US dollar Euro
Bought amount (Million) 1.16 0.03
Contractual exchange rate of bought amount (Baht per 1 foreign currency unit) 30.26 39.88
In addition, the Company has entered into agreements, which have special conditions, with local financial institutions to buy foreign currency. The trigger of these agreements and the amounts of foreign currency to be bought under them depend on conditions stipulated in the agreements, with the maximum amount of foreign exchange totaling USD 1 million at contractual exchange rates of Baht 32.45 per USD 1. The agreements mature within one year.