SANDYPORT HOMEOWNERS ASSOCIATION LIMITED

NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2021 (CONTINUED)

(Expressed in Bahamian dollars)

20.CONTINGENT LIABILITIES (CONTINUED)

Seawall - With the exception of a few unstable and incomplete sections of wall noted in an engineer’s report commissioned by the Association, the seawall is in fair condition with primarily corrosion damage to the coping beam. Engineers have advised that the durability and appearance of the wall can be improved significantly by completing the noted repairs and coating the concrete surface. The overall cost of the repairs has not been fully quantified.

21.FINANCIAL RISK MANAGEMENT

The Homeowners Association is exposed to a variety of risks including liquidity risk, credit risk, interest rate risk and capital risk management arising in the normal course of the Homeowners Association’s business activities. The Homeowners Association does not have any written risk management policies and guidelines. Management monitors the financial risks of the Homeowners Association and takes such measures as considered necessary from time to time to minimize such financial risks.

Liquidity risk - Liquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly, at close to its fair value.

Prudent liquidity risk management implies maintaining sufficient cash. The Homeowners Association monitors and maintains a level of bank balances deemed adequate to finance its operations. The Homeowners Association deposits cash with financial institutions of good standing.

Credit risk – Credit risk arises from the possibility that customers may not be able to settle obligations within the normal terms of transactions. The Homeowners Association performs ongoing credit evaluation of the debtors’ financial condition and maintains an account for allowance for doubtful trade and other accounts receivable based upon the expected collectibles of all trade and other accounts receivable.