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Investor Presentaiton

97 A.P. Moller-Maersk Annual Report 2020 Financials Consolidated financial statements Notes index Note 16 Financial instruments and risks - continued Table 16.9 Maturity analysis of trade receivables Receivables not due Less than 90 days overdue 91-365 days overdue More than 1 year overdue Receivables, gross Provision for bad debt Carrying amount The loss allowance provision for trade receivables as at 31 December 2020 reconciles to the opening loss allowance as follows: Table 16.10 Change in provision for bad debt 1 January Provision made Amount used Amount reversed Amounts in USD million = 2020 2019 2,358 1,133 161 152 3,804 170 3,634 2,431 1,020 150 145 3,746 215 3,531 2020 2019 215 269 238 217 160 149 124 121 Table 16.9 and table 16.10 Credit risk Trade receivables The Group has exposure to financial and commercial counterparties but has no particular concentration of customers or suppliers. To minimise the credit risk, finan- cial vetting is undertaken for all major customers and financial institutions. Adequate security is required for commercial counterparties, and credit limits are set for financial institutions and key commercial counterparties. The Group applies the simplified approach to providing the expected credit losses prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. In accordance with IFRS 9, not due trade receivables have also been impaired. Approximately 89% (67%) of the provision for bad debt is related to trade receivables overdue by more than one year. Other financial assets at amortised cost Other financial assets at amortised cost comprise loans receivable, finance lease receivables and other receiva- bles. These financial assets are considered to have low credit risk, and thus the impairment provision calculated based on 12 months of expected losses is considered immaterial. The financial assets are considered to be low risk when they have a low risk of default, and the issuer has a strong capacity to meet its contractual cash flow obligations in the near term. Table 16.11 Liquidity risk The Group's objective is to maintain a liquidity profile in line with an investment grade credit rating. Capital is managed for the Group. The equity share of total equity and liabilities was 55.0% at the end of 2020 (52.0% end of 2019). For information about cash and bank balances in coun- tries with exchange control or other restrictions, see text to the consolidated cash flow statement. Based on the liquidity reserve, loans for the financing of specific assets, the maturity of outstanding loans, and the current investment profile, the Group's financial resources are deemed satisfactory. The average term to maturity of loan facilities in the Group was about five years (about five years at 31 December 2019). Further information about capital structure and funding strategy can be found on pages 60-62. 1 Liquidity reserve is defined as undrawn committed revolving facilities with more than one year to expiry, securities, term deposits and cash and bank balances, excluding securities and balances in countries with exchange control or other restrictions. Transfer, assets held for sale - Exchange rate adjustment and others 1 -1 31 December 170 215 Table 16.11 Net interest-bearing debt and liquidity 2020 2019 Borrowings 15,373 Net interest-bearing debt 9,232 16,753 11,662 Liquidity reserveĀ¹ 10,962 10,485
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