Consolidated Financial Statements
25. Reclassification Certain amounts previously reported in 2009 consolidated financial statements, including goodwill of SR 119.18 million reclassified as part of the carrying value of the investment in affiliate, have been reclassified to conform to current year presentation. 26. Financial instruments and risk managements The Company’s activities, including subsidiaries, expose it to a variety of financial risks: market risk (including currency risk, fair value and cash flow commission rate exposure and price risk), credit risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance. Financial instruments carried on the balance sheet principally include cash and cash equivalents, investments, receivables, borrowings, derivative financial instruments, payables and certain accrued expenses. Financial asset and liability is offset and net amounts reported in the financial statements, when the Company has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis, or to realize the asset and liability simultaneously. Risk management is carried out by senior management. The most important types of risk are summarized below. 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 and its subsidiaries maintains its cash with high credit rated banks. Receivables are carried net of provision for doubtful debts. Commission rate exposure This relates to the Company’s and subsidiaries’ exposure to the risk of fluctuations in commission rates in the market and the potential impact on the consolidated financial position of the Company and its cash flows. The Company’s and subsidiaries’ commission rate risk arises mainly from its short-term deposits and borrowings. 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 finance. 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 relates to the risk of change in the value of financial instruments due to change in foreign currency rates. The Company’s and subsidiaries’ transactions are mainly in Saudi riyals, UAE Dirhams and US dollars. Management monitors the currency rate changes and believes that the impact of currency rate changes is not significant.
The National Shipping Company of Saudi Arabia Annual Report 2010
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