PEILCC Annual Report 2025-2026

PRINCE EDWARD ISLAND LIQUOR CONTROL COMMISSION Notes to Financial Statements March 31, 2026

18. FINANCIAL RISK MANAGEMENT (continued) (a) Credit risk

Credit risk is the risk that the Commission will incur a loss because a customer fails to meet an obligation. The Commission is exposed to this risk for financial instruments classified as financial assets measured at amortized cost by granting credit to customers. The Commission's maximum exposure to credit risk is limited to the carrying amount of these financial assets recognized at the reporting date, $1,737,857 (2025 - $1,576,939). The Commission has mitigated its exposure to this risk through the limited extension of credit and its contractual relationships with its business partners. The Commission's management considers that an allowance of $94,928 (2025 - $65,742) is required for the above loans and receivables to be fairly stated. The loans and receivables are shown net of the expected credit losses. The expected credit losses were calculated by reviewing the aging of receivables and assigning higher probability of credit losses to balances outstanding for longer periods of time. The financial condition of customers was also evaluated based on experience. With respect to financial assets measured at amortized cost, the Commission is not exposed to any significant credit risk exposure to any single supplier. Trade receivables consist of a large number of customers in various industries and geographical areas. Management considers the credit quality of trade receivables to be good. Some of the unimpaired financial assets measured at amortized costs are past due as at the reporting date. The aging of unimpaired assets is as follows:

2026

2025

$592,640 322,584 427,245 94,037 140,433 $1,576,939

$634,803 395,956 458,905 114,288 133,905 $1,737,857

Current Less than 30 days 30 - 60 days 61 days -1 year More than 1 year

Included above is $133,905 (2025 - $140,433) in more than 1 year related to PEI Cannabis Management Corporation. (b) Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency rate risk, interest ate risk and other price risk. The Commission's market risk management focuses on the unpredictability of financial and economic markets and seeks to minimize potential effects on the Corporation's financial performance. In common with many organizations that purchase in foreign currencies, the Commission may be exposed to a marginal degree of currency risk. Management has mitigated the exposure to this risk by limiting the number of purchase transactions in foreign currency.

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