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Notes To The Consolidated Financial Statements
(Expressed in Renminbi)
1
/ China Communications Services Corporation Limited
42 Commitments and contingent liabilities
(continued)
(b) Operating lease commitments
(continued)
The Group leases a number of properties under operating leases. The leases typically run for period of
one year to six years, with an option to renew the lease when all terms are renegotiated. None of the
leases includes contingent rentals.
(c) Contingent liabilities
As at 31 December 2011, the Group had no material contingent liabilities and no material financial
guarantees issued.
43 Financial risk management and fair values
Exposure to credit, interest rate, liquidity and currency risks arises in the normal course of the Group’s
business. The Group is also exposed to equity price risk arising from its equity investments in other entities
and movements in its own equity share price.
The Group’s exposure to these risks and the financial risk management policies and practices used by the
group to manage these risks are described below.
(a) Credit risk
Management has a credit policy in place and the exposure to credit risks is monitored on an ongoing
basis. Credit evaluations are performed on all customers requiring credit over a certain amount.
Normally, the Group does not obtain collateral from customers.
The Group’s major customers are CTC Group and CM Group. The Group has a certain concentration
of credit risk as the Group’s largest customers accounted for 61% of the total accounts and bills
receivable as at 31 December 2011 (2010: 70%). The Group has no significant credit risk with any of
these customers since the Group maintains long-term and stable business relationships with these
large customers in the telecommunications industry.
The credit risk on cash at banks and restricted bank deposits is limited because the counterparties are
banks with high credit rankings, mainly the four large state-owned banks.
The credit risk on available-for-sale investments arises from loss in value through corporate failure.
The Group mitigate the credit risk on available-for-sale investments by closely monitor its portfolio and
minimise investments on these assets. The Group’s available-for-sale investments are less than 2% of
its total assets for both 2011 and 2010.
The amounts of cash and cash equivalents, time deposits, accounts and bills receivable, other
receivables and available-for-sale investments in the balance sheet after deducting impairment
allowance represent the Group’s and the Company’s maximum exposure to the credit risk in relation
to financial assets.
(b) Interest rate risk
The Group’s interest rate risk exposure primarily from its short-term debts carrying interests at fixed
rates exposed the Group to fair value interest rate risk. The Group manages its exposure to interest
rate risk by maintaining high proportion of fixed rate debts with maturity within one year. Details of the
interest rates are disclosed in note 34.