The carrying amount of financial assets represents the maximum credit exposure.
As of December 31, 2024, the maximum exposure to credit risk was as follows:
Particulars 2024 2023
Trade receivables & other receivables ₱ 296,953,844.87 ₱ 248,012,465.02
Cash and cash equivalent 5,758,980,866.60 6,067,225,532.28
Maximum exposure to credit risk ₱ 6,055,934,711.47 ₱ 6,315,237,997.30
Credit quality
Credit quality is the assessed risk of default attached to counterparties to which the
Province of Negros Oriental extends credit and also to those parties with whom the
LGU invests. As such, the credit quality assessed extends to the customers,
investments, and banks servicing the LGU.
For financial statement purposes, the investments and balances with banks are
limited to the investments, loans receivable, and cash and cash equivalents line
items in the statement of financial position. The LGU follows Department Order
No. 27-05 of the Department of Finance (DOF) in the maintenance of depository
accounts. However, the Province was not able to secure the credit quality of the
investments, loans receivables, and cash and cash equivalent.
For the purpose of determining the credit quality of customers, the LGU applies its
past experience with customers in determining the risk of default posed by
customers. In line with the methodology applied, customers are classified into the
following credit quality groups:
a) High - Those customers who have no history of defaulting on payments to
the LGU and only include customers who settle their accounts in full and
within the prescribed minimum period;
b) Medium - Those customers with a history of late payments only. These
customers usually arrange ahead of time with the LGU to settle balances in
arrears, and when payments are made, the outstanding amounts (including
interest) are settled in full; and
c) Low - Those customers with a significant history of defaults. The balances of
these customers are rarely settled in full. The recovery of outstanding balances
from these customers is problematic.
The credit quality of the balance of receivables and other receivables is made up as
follows:
2024 2023
High ₱ 136,441,001.36 ₱ 99,041,846.34
Medium 153,257,082.66 142,462,307.83
Low 7,258,310.85 6,508,310.85
Total instrument at amortized cost exposed to credit risk ₱ 296,956,394.87 ₱248,012,465.02
Investments
The LGU limits its exposure to credit risk by investing with only reputable
financial institutions that have a sound credit rating (rated BB and above), which
are within the specific guidelines set in accordance with the Finance Committee
and the Sanggunian approved investment policy. The Province is currently
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