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35 URBAN DEVELOPMENT CORPORATION Notes to the Non-Consolidated Financial Statements (Continued) Year ended March 31, 2010

26.

Financial instruments (cont’d) (a)

Financial risk management (cont’d): The corporation has financial risk management policies which are directed by its Board of Directors. These policies set out the corporation’s overall business strategies and its risk management philosophy. The financial risk management programme seeks to minimize potential adverse effects of financial performance of the corporation. The Board of Directors provides principles for overall financial risk management and policies covering specific areas, such as market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and other price risk), credit risk and liquidity risk. Periodic reviews are undertaken to ensure that the policy guidelines are complied with. The corporation’s activities expose it to a variety of financial risks, including the effects of changes in foreign currency exchange rates and interest rates. There has been no change during the year to the corporation’s exposure to these financial risks or the manner in which it manages and measures the risk. The corporation does not hold or issue derivative financial instruments. The following table sets out the financial instruments as at the reporting date: 2010 $’000

2009 $’000

Financial assets: Loans and receivables (including cash and bank balances)

1,253,723

2,178,323

Financial liabilities: Other liabilities

1,892,108

1,899,393

(i)

Credit risk: Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The corporation’s principal financial assets are cash and bank balances and trade receivables. Management of credit risk The credit risk relating to cash and bank balances is mitigated by the maintenance of deposits only with reputable financial institutions with minimal risk of default. The corporation’s credit risk is primarily attributable to its trade receivable, since amounts advanced on specific projects are receivable from funds received from the Government of Jamaica and mobilization advances are receivable from amounts payable to contractors. Trade receivables presented in the statement of financial position are net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which based on previous experience, is evidence of a reduction in the recoverability of the cash flows. The corporation’s risk regarding advances to specific projects and mobilization advances are limited because the corporation’s primary customers are government-owned companies. In determining the recoverability of other trade receivables, the corporation considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the corporation believes that there is no further credit provision required in excess of the allowance for doubtful debts.

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