Page 204 - InterloopAnnualReport2020

NOTES TO THE UNCONSOLIDATED

FINANCIAL STATEMENTS

For the year ended June 30, 2020

52.2 Credit risk
Credit risk is the risk representing accounting loss that would be recognized at the reporting date if one
party to a financial instrument will fail to discharge an obligation or its failure to perform duties under the
contract as contracted. Concentration of credit risk arises when a number of counterparties are engaged in
similar business activities or have similar economic features that would cause their ability to meet contractual
obligations that is susceptible to changes in economic, political or other conditions. Concentration of credit
risk indicates the relative sensitivity of the Company’s performance to developments affecting a particular
industry. The maximum exposure to credit risk at the reporting date is as follows :

2020 2019
(Rupees ‘000) (Rupees ‘000)

Long term loans 113,823 65,762
Long term investments 500,000 –
Long term deposits 38,337 28,019
Trade debts 7,207,391 8,247,740
Loans and advances 57,792 66,343
Other receivables 181,143 83,980
Accrued income 2,239 10,441
Short term investments 125,044 1,207,251
Bank balances 136,618 1,512,211
8,362,387 11,221,747

Loans and advances consist of loans to employees & director and Metis International (Pvt) Ltd. Loans to
employees and director are secured against their retirement benefits and loan to Metis International is also
secured through an irrevocable lien/charge on total assets of the Metis International (Pvt) Limited. Therefore,
Company is not exposed to any significant credit risk on these loans.

Long term deposits have been mainly placed with suppliers of electricity, gas and telecommunication
services. Considering the financial position and credit quality of the institutions, Company’s exposure to
credit risk is not significant.

Trade debts amounting to Rs. 4,376 million (2019: Rs. 4,251 million) out of total debts are secured against
letters of credit and insured contract. Furthermore, credit quality of customers is assessed taking into
consideration their financial position and previous dealings and on that basis, individual credit limits are set.
Moreover, the management regularly monitors and reviews customers’ credit exposure. Accordingly, the
company is not exposed to any significant credit risk.

Other receivables constitute mainly receivables from the related parties and mark up subsidy from banks.
Considering the financial position of related parties and credit quality of banks and insurance company
exposure to credit risk is not significant.

The company has no material expected credit loss or impairment allowance at the year end regarding trade
debts and other receivables.
Long and short term investments are investments in TFCs and TDRs respectively. The credit risk on these
investments is limited because counter party is bank with reasonably high credit ratings.

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