CPA Annual Report : CPA Annual report 2012
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term time deposit is mainly made for three-month periods depending on the immediate cash requirement of the Trust Fund and earn interest at the prevailing short-term deposit rates. 6. Amount due to the Institute e amount due to the Institute is unsecured, interest-free and repayable on demand. 7. Grants to members During the current year, grants totaling HK$44,850 (2011: HK$228,300) were paid to help alleviate members facing financial hardship. 8. Financial risk management Financial instruments consist of bank balances, other receivables and amount due to the Institute. e Trust Fund carries as little risk from financial instruments as practicable. e liquidity risk is disclosed in note 6 to the financial statements. e Trust Fund is exposed to other financial risks which are discussed below: a. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. e Trust Fund's exposure to interest rate fluctuations is mainly limited to interest receivable on its short-term time deposit. Management considers that the Trust Fund has limited exposure to interest rate risk relating to the savings account as the changes in interest rate of the savings account over the period until the end of the next annual reporting period are expected to be minimal. Any fluctuation in the prevailing levels of market interest rates will have an impact on the interest income alone as the Trust Fund did not borrow any interest bearing loans. e Trust Fund manages the interest rate risk by monitoring closely the movements in interest rates in order to limit potential adverse impact on interest income. b. Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. e Trust Fund has designed its credit policy with an objective to minimize its exposure to credit risk. e Trust Fund also has a policy in place to evaluate credit risk when loans are granted to members and the repayments of short term loans to members are closely monitored. Further quantitative data in respect of the exposure to credit risk arising from short term loans to members are disclosed in note 4 to the financial statements. e Trust Fund's surplus cash has been deposited with reputable and creditworthy banks. Management considers there is minimal risk associated with the bank balances. 9. Capital management e Trust Fund operates by allocating its receipts and therefore is not exposed to any capital deficiency risk. In the event of capital needs, the Institute will make donations to the Trust Fund to ensure its capital adequacy.