4.4 Revenue-related receivables and credit risk management
|3. TRADE RECEIVABLES AND OTHER RECEIVABLES, €1,000||2019||2018|
|Trade receivables from associated companies||782|
|Loan receivables from associated companies||188||500|
|Prepayments and accrued income from associated companies||3,693||9|
|Prepayments and accrued income||6,887||7,199|
|Essential items included in prepayments and accrued income||2019||2018|
|Accruals of sales||3,145||2,662|
|Accruals of purchases/prepayments||1,115||1,533|
Credit risk management – customers
According to The Electricity Market Act, the company is obliged to accept distribution network operators joining the grid as well as electricity producers and consumers as its customers. Accordingly, the company cannot choose its customers based on a credit risk analysis or collect different fees from them. In general, collateral are not required from the company’s customers to secure sales payments, but in the event of an overdue payment, this is possible. The unit in charge of the customer relationships is responsible for verifying their creditworthiness. The procedure following a customer payment default is defined in the terms and conditions of the Main Grid Contract. Fingrid requires a collateral (either bank guarantees or an upfront payment) in order to cover the electricity taxes payable by customers connected to the grid and subject to the tax, as ruled in the Main Grid Contract’s Service Terms and Conditions. At the turn of the year, the company had minor outstanding receivables, of which the credit risk was considered to be low, and the company estimates it will receive these payments. The company has no impairments related to receivables.
Netting of trade receivables and trade payables
The trade receivables and trade payables are netted in the balance sheet as presented in the table below. The netted items are associated with purchases and sales of imbalance power. The company has a legally enforceable right of set-off to these items in any circumstance and will use this right.
|4. NETTING OF TRADE RECEIVABLES AND TRADE PAYABLES € 1,000|
|Gross amount of trade receivables/trade payable||Amount of netted items||Net amount of trade receivables and trade payables presented in the balance sheet||Gross amount of trade receivables/trade payables||Amount of netted items||Net amount of trade receivables and trade payables presented in the balance sheet|
Trade and other receivables
Loans and other receivables are recognised initially at fair value; subsequently they are measured at amortised cost using the effective interest rate method. The expected credit losses are assessed based on historical amounts of credit losses, taking into account forward-looking information on economical developments and receivable-specific assessments. Impairment losses are recognised directly, under other operating expenses, to reduce the carrying amount of the receivables. Fingrid did not have any impairment losses during the periods presented here.
In addition to trade receivables and other receivables, the company has a small amount of loan receivables from associated companies. These are long- and short-term and described in Chapter 7.1. The receivables from associated companies are recognised according to these same accounting principles.