Revenue-related receivables and credit risk management

4.4 Revenue-related receivables and credit risk management
3. TRADE RECEIVABLES AND OTHER RECEIVABLES, €1,000 2017 2016
Trade receivables 80,915 72,914
Trade receivables from associated companies 3,888 125
Prepayments and accrued income from associated companies 46 18
Prepayments and accrued income 9,771 7,835
Other receivables 1,448 1,298
Total 96,068 82,191
Essential items included in prepayments and accrued income 2,017 2,016
Accruals of sales 1,634 1,153
Accruals of purchases/prepayments 2,281 2,364
Interest receivables 2,737 4,118
Rents/prepayments 789 200
Tax assets 2,331  
Total 9,771 7,835

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, with assistance from the Treasury unit. The Treasury has defined an operating process for monitoring customers’ payment defaults in the terms and conditions of the Main Grid Contract. Any collateral required by Fingrid will be 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 few outstanding receivables, the credit risk for which 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
  2017 2016
  Gross amount of trade receivables/trade payables 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 receivables 94,764 -9,961 84,803 88,176 -15,136 73,040
Trade payables 43,583 -9,961 33,622 40,113 -15,136 24,976
 

 Accounting principles

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 amount of doubtful receivables is estimated based on the risks of individual items. An impairment loss is recorded on receivables when there is valid evidence that the Group will not receive all of its receivables at the original terms (e.g. due to the debtor's serious financial problems, likelihood that the debtor will go bankrupt or be subject to other financial rearrangements, and payments overdue by more than 90 days). 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-term and described in Chapter 7.1. The receivables from associated companies are recognised according to these same accounting principles.