The American Club 2019/2020 Annual Report

53 PAGE

NOTES TO FINANCIAL STATEMENTS 30 June 2020

4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL MANAGEMENT (cont’d) The Club determines the expected credit losses based on historical credit loss experience based on the past due status of the member, adjusted as appropriate to reflect current conditions and estimates of future economic conditions. The Club mitigates its credit risks through its various credit evaluation processes, credit policies, credit control and collection procedures. There is no concentration of credit exposure to any one particular member. All due from members that are neither past due nor impaired relate to members that the Club has assessed to be creditworthy, based on the credit evaluation process performed by management. The maximum exposure to credit risk in the event that members fail to perform their obligations as at the end of the financial year in relation to each class of recognised financial assets is the carrying amount of those assets stated in the statement of financial position. Further details of credit risks on due frommembers and other receivables are disclosed in Notes 7 and 8 respectively. (iv) Market price risk management Market price risk refers to the risk that the fair value or future cash flows of the Club’s financial instruments will fluctuate because of changes in market prices (other than interest or exchange rates). The Club is not exposed to market price risk. Specific investment guidelines are used to monitor the risk in the Club’s investments. No sensitivity analysis is prepared as the Club does not expect any material effect on the Club’s profit and loss arising from the effects of reasonably possible changes to market price on fair value of financial instruments at the end of the reporting period. (v) Liquidity risk management Liquidity risk arises from the possibility that the Club is unable to meet its obligations towards other counterparties. The Club aims to maintain flexibility in funding by maintaining sufficient cash and bank balances, and internally generated cash flows to finance its activities. All financial liabilities in 2020 and 2019 are repayable on demand or due within 1 year from the end of the reporting period. The effective interest rates, where applicable, are disclosed in the respective notes to the financial statements.

(vi) Fair value of financial assets and liabilities The carrying amounts of cash and cash equivalents, due from/to members and other receivables and payables, provisions and other liabilities approximate their respective fair values due to the relatively short-term maturity of these financial instruments.