Aero company is a company engaged in the field Manufacturing and sales of 60% in the country, and 40% abroad.

Aero company, as of June 30, 2020 (equivalent to rupiah) has the following assets:

Cash and cash equivalents IDR 100,000,000

Account receivable IDR 500,000,000

Fixed assets IDR 900,000,000 Of the assets held,

cash and cash equivalents in foreign currencies USD equivalent to IDR 40,000,000,

trade receivables in foreign currency IDR equivalent to IDR 200,000,000

On average, these accounts receivable will be paid / due in February 2021. Sometimes Aero company often carries out factoring transactions with banks when they need funds.

Aero company also has the following liabilities (rupiah equvalent):

Accounts payable IDR 300,000,000

Bank debt IDR 700,000,000 Of the liabilities held, all Bank Loans are denominated in USD with Libor + 2% interest which will mature at the end of 2020.

From the data for the last 5 years, the company likelihood rate for default ( PD) per year is 2015: 3% 2016: 2.5% 2017: 2% 2018: 6% (due to difficult market conditions resulting in some large customers experiencing financial difficulties) Year 2019: 2% (conditions are getting better so that it returns to normal).

Meanwhile, the data shows recovery / returns on customers who are default about 60% of their accounts receivable.

Better market conditions mean that in early June 2020, the company plans to expand with a plan to purchase additional fixed assets to increase production capacity by up to 30% for the next 2 years. Aero company has ordered the new machine for USD 1,000,000 and it is planned to arrive at the company on June 30, 2022.

On 30 June 2020, 1 USD equivalent to IDR 10,000.

Please answer each question below, accompanied by an analysis to support your answer (please use assumptions if needed):

A. Does Aero company need to make a loss reserve? If so, how big would it be?

B. According to IAS 39/ IFRS 9, what is Aero companys business model?

C. What risks does Aero companys have and how to mitigate these risks?