Consolidated Financial Statements
58
Notes To The Consolidated Financial Statements For the year ended December 31, 2008 (InThousands Saudi Riyals)
24. Subsequent Events On 9/1/2009 NCC (a subsidiary) signed a sale agreement with a Norwegian company for the sale of three of its old tankers (NCC Arar, NCC Asir & NCC Baha) due to the short period remaining in their useful life for a price of SR 99.4 realizing a gain of SR 27 million. These tankers were delivered to the buying company during the second half of January 2009 and they were operating under a pooling agreement with Odfjell Sachems Company since 1990 with similar tankers in transporting chemicals. 25. Reclassification Certainamountspreviouslyreported in 2007 financial statements have been reclassified to conform to current year presentation. 26. Financial instruments and risk management carried on the balance sheet principally include cash, deposits, government development bonds, receivables, payables and certain accrued expenses. Credit risk Credit risk is the risk that counterparties do not meet their obligations, so the other party incurs a financial loss. At the balance sheet date, there was no significant concentration of credit risk. The Company maintains its cash with high credit rated local banks. Receivables are carried net of provisions for doubtful debts. Commission rate exposure This related to the Company’s exposure to the risk of change in commission rates in the market and the potential impact on the financial position of the Company and its cash flows. The Company is using commission rate swaps to fix the commission rates and uses commission rate caps to hedge the risk of increase in commission rate for its long term Financial instruments
loans. The Company monitors the commission rate changes and believes that expected commission rate changes on the Company after considering its hedges is not significant. Currency risk This related to the risk of change in the value of financial instruments due to change in foreign currency rates. The Company’s transactions are mainly in Saudi riyals and US dollars. The Company monitors the currency rate changes and believes that the impact of currency rate changes on the Company is not significant. Liquidity risk This represents risks that the Company will be unable to meet its funding requirements related to financial instruments. The liquidity risk arises if the Company cannot sell its financial assets quickly with an amount near to its fair value. Liquidity risk is managed by systematic monitoring to ensure availability of funds to meet any future liabilities as they become due. Fair Value Fair value is the amount used to exchange assets or to settle liabilities between parties having the knowledge and desire to do so on an arms-length basis. As the financial statements of the Company are prepared based on historical cost, except for the investments in affiliated companies and investments in financial instruments, differences might occur between book value and estimates of fair values. The management believes that the fair value of financial assets and liabilities does not materially differ from its book value.
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