Bahri Annual Report-2017

Annual Report 2017

192

193

Notes to the Consolidated Financial Statements (continued) December 31, 2017 (In Thousands Saudi Riyal)

11 Consolidated Financial Statements

28. FINANCIAL INSTRUMENTS (continued) 28.4 Financial Risk Management (continued)

Notes to the Consolidated Financial Statements (continued) December 31, 2017 (In Thousands Saudi Riyal) 28. FINANCIAL INSTRUMENTS (continued) 28.3 Fair values of financial instruments (continued)

The financial instruments in the consolidated statement of financial position primarily comprised primarily of cash and cash equivalent, investments, trade receivables, financing, trade payables, other accrued expenses, derivative financial instruments and loans and sukuk. Financial assets and liabilities are netted together and shown as a net amount, if the Group has the legal right to do so and the intention is to either settle on the net or recognize the assets and liabilities simultaneously. Higher management monitors the financial risk management department. The most important types of risk are summarized below: 28.4.1. Credit risk Credit risk is the risk that one party will fail to discharge an obligation and cause the other party to incur a financial loss. The Group seeks to manage its credit risk by dealing with reputable banks and with respect to customers by setting credit limits for individual customers, monitoring outstanding receivables and ensuring close follow-ups. Financial instruments and cash deposits Credit risk from balances with banks and financial institutions is managed by the Group’s treasury department in accordance with the Group’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Group’s Board of Directors on an annual basis. Limits are designed to minimize risk concentration and decrease financial loss through the inability of the counterparty to make the payments. The maximum exposure to credit risk for the components of the consolidated statement of financial position is the carrying amounts shown in note 28 except for financial guarantees and derivative financial instruments. 28.4.2. Liquidity risk Liquidity risk represents the Group's difficulties in providing funds to meet commitments associated with financial instruments. The Group's liquidity risk management policy is to ensure that sufficient liquidity and financing are available to meet its liabilities when due.

The fair value hierarchy is as follows:

2017

Qouted prices in the active market (Level 1)

Significant observable inputs (Level 2)

Significant Unobservable inputs (Level 3)

Total

Available for sale: Unquoted equity shares *

10,711

Derivatives measured at fair value through statement of income CAP commission option

67,572

2016

Qouted prices in the active market (Level 1)

Significant observable inputs (Level 2)

Significant Unobservable inputs (Level 3)

Total

Available for sale: Unquoted equity shares *

13,533

Derivatives measured at fair value through statement of income CAP commission option

The amounts in the table below represent contractual undiscounted cash flows:

96,267

2017

1 January 2016

Within 3 months

3 to 12 months

1 to 5 years

More than 5 years

No fixed maturity

Qouted prices in the active market (Level 1)

Significant observable inputs (Level 2)

Total

Significant Unobservable inputs (Level 3)

Total

281,296

793,993

3,181,590

2,175,203

6,432,082

Available for sale: Unquoted equity shares *

Long term loans

- 3,900,000

13,533

Sukuk

520,038 107,906

26,992

40,011 694,947

Derivatives measured at fair value through statement of income Profit rate caps

Trade payable and other current liabilities

69,467

56,629

Employee’s benefits

801,334 901,899 3,208,582 6,075,203 109,478 11,096,496

*Based on provisions of IAS 39, carrying value has been used as an approximation to the fair value

Management believes that the fair value of other assets and liabilities approximate to their carrying values.

28.4 Financial Risk Management The Group's activities expose it to a variety of financial risks, including market risk (comprising currency risk, fair value risk, cash flows for commission rate, credit risk and liquidity risk). The Group’s risk management focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance).