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Gamuda Berhad (29579-T) • Annual Report 2012
44. Financial risk management objectives and policies (cont’d.)
(c)
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial
instruments will fluctuate because of changes in market interest rates.
The Group’s and the Company’s exposure to interest rate risk arises primarily from their loans and
borrowings.
The Group’s policy is to manage interest cost using a mix of fixed and floating rate debts. To manage this mix
in a cost-efficient manner, the Group enters into interest rate swaps. At the reporting date, after taking into
account the effect of an interest rate swap, approximately 55% (2011: 61%) of the Group’s borrowings are at
fixed rates of interest.
Sensitivity analysis for interest rate risk
At the reporting date, if interest rates had been 25 basis points lower/higher, with all other variables held
constant, the Group’s profit net of tax would have been RM3,623,000 (2011: RM1,416,000) higher/lower,
arising mainly as a result of lower/higher interest expense on floating rate loans and borrowings. The assumed
movement in basis points for interest rate sensitivity analysis is based on the currently observable market
environment.
(d)
Market price risk
Market price risk is the risk that the fair value or the future cash flows of the Group’s and the Company’s
financial instruments will fluctuate because of changes in market prices (other than interest or exchange
rates).
The Group is exposed to market price risk arising from its investment in management fund. These instruments
are classified as held for trading financial assets. The Group does not have exposure to commodity price risk.
As at reporting date, the Group does not have significant market price exposure.
(e)
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in foreign exchange rates.
Transactions in foreign operation are mainly denominated in the functional currency of the country it operates,
and other foreign currency transactions are kept to an acceptable level. The Group’s revenue that are
denominated in foreign currencies are as disclosed in Note 46.
Included in the following statements of financial position captions of the Group as at the reporting date are
balances denominated in the following major foreign currencies:
NoTES To ThE FINANCIAL STATEMENTS
31 July 2012