Page 152 - InterloopAnnualReport2021

NOTES TO THE

FINANCIAL STATEMENTS

For the year ended June 30, 2021

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 :

2021 2020
(Rupees ‘000) (Rupees ‘000)
Long term loans 144,673 113,823
Long term investments – 500,000
Long term deposits 60,478 38,337
Trade debts 15,052,940 7,207,391
Loans and advances 121,955 57,792
Other receivables 289,186 181,143
Accrued income 2,131 2,239
Short term investments 500,000 125,044
Bank balances 356,155 136,618
16,527,518 8,362,387

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
along with its accrued interest is also secured through an irrevocable lien/charge on total assets of the
Metis International (Pvt) Limited. Therefore, the 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, the Company’s exposure
to credit risk is not significant.

Trade debts amounting to Rs. 6,235 million (2020: Rs. 4,376 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 subsidy on gas. Considering
the financial position of related parties and credit quality of the institution, the Company’s 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.

Short term investments are investments in TFCs. The credit risk on these investments and their accrued
profit is limited because counter party is bank with reasonably high credit ratings.

The credit quality of the Company’s bank balances can be assessed by reference to external credit
ratings or to historical information about counterparty default rate:

150