28 ISSUE EXPENSES
(continued)
Included in issue expenses are non-audit fees paid to auditors of the Group and the Trust of
$148,000 (2013: $190,000) for services performed in connection with the issuance of
units/perpetual securities.
29 FINANCIAL INSTRUMENTS
Financial risk management
Overview
The Group has exposure to the following risks from its use of financial instruments:
• credit risk
• liquidity risk
• market risk
This note presents information about the Group’s exposure to each of the above risks, the
Group’s objectives, policies and processes for measuring and managing risk, and the Group’s
management of capital. Further quantitative disclosures are included throughout these financial
statements. There were no changes in the Group’s approach to financial risk management
during the year.
Risk management framework
The Manager has overall responsibility for the establishment and oversight of the Group’s risk
management framework.
Risk management is integral to the whole business of the Group. The Group has a system of
controls in place to create an acceptable balance between the cost of risks occurring and the
cost of managing the risks. The Manager continually monitors the Group’s risk management
process to ensure that an appropriate balance between risk and control is achieved. Risk
management policies and systems are reviewed regularly to reflect changes in market
conditions and the Group’s activities.
The Audit Committee oversees how management monitors compliance with the Group’s risk
management policies and procedures and reviews the adequacy of the risk management
framework in relation to the risks faced by the Group. The Audit Committee is assisted in its
oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of
risk management controls and procedures, the results of which are reported to the Audit
Committee.
Credit risk
Credit risk is the potential financial loss resulting from the failure of a customer or a counterparty
to settle its financial and contractual obligations to the Group as and when they fall due.
The Manager has established credit limits for customers and monitors their balances on an
ongoing basis. Credit evaluations are performed by the serviced residence management
companies before lease agreements are entered into with customers. Cash and fixed deposits
are placed with financial institutions which are regulated. Transactions involving derivative
financial instruments are allowed only with counterparties that are of high quality.
The Group establishes an allowance for impairment that represents its estimate of incurred
losses in respect of trade and other receivables. The main component of this allowance is a
specific loss component that relates to individually significant exposures.
Notes to the Financial Statements
Year ended 31 December 2014
170 | Ascott Residence Trust Annual Report 2014
