IREIT Global
annual report 2014
For the reporting period from 1 November 2013 (date of constitution) to 31 December 2014
Notes to the
Financial Statements
22.
FINANCIAL INSTRUMENTS
(Continued)
(b) Financial risk management objectives and policies
Details of the Group’s and IREIT’s financial instruments are disclosed in the respective notes.
The risks associated with these financial instruments include credit risk, interest rate risk,
foreign currency risk and liquidity risk.
The policies on how to mitigate these risks are set out below. The Manager manages and
monitors these exposures to ensure appropriate measures are implemented on a timely
and effective manner.
Interest rate risk
IREIT’s exposure to changes in interest rates relates primarily to interest-bearing financial
liabilities. IREIT’s policy is to maintain its borrowings in fixed rate instruments and the terms
of repayment of IREIT’s borrowing and its interest rate are shown in Note 11. IREIT does
not currently hold or issue derivative instruments to hedge its interest rate instruments.
Accordingly, no sensitivity analysis is prepared.
Credit risk
Credit risk is the potential financial loss resulting from the failure of a tenant or counterparty
to settle its financial and contractual obligations to the property companies, as and when
they fall due. IREIT has adopted a policy of obtaining either banker guarantees or cash
deposits from tenants to mitigate the risk of financial loss from default. Credit evaluations
are performed by the Property Manager on behalf of the Manager.
The credit risk on liquid funds is limited as cash and cash equivalents are placed with
reputable financial institutions which are regulated. The maximum exposure to credit risk
of IREIT is represented by the carrying value of each financial asset on statement of financial
position. As at 31 December 2014, there is no significant concentration of credit risk.
Approximately 10% of the Group receivables as at 31 December 2014 and 79% of Group
revenue for the financial period are from a group of companies in Germany.
