Page 171 - S P Setia Annual Report 2013
P. 171

Annual Report 2013 S P SETIA BERHAD GROUP Financial Statements | 169





NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 OCTOBER 2013 (CONT’D)






44. cOntinGent liaBilitieS (unsecured)

Group company
2013 2012 2013 2012
Rm’000 Rm’000 Rm’000 Rm’000


Guarantees given to banks to secure banking facilities granted
to subsidiary companies - - 5,170,574 2,713,844
Guarantees given to banks for performance bonds granted to
subsidiary companies - - 33,079 30,612
Guarantees given to the suppliers of goods for credit terms
granted to subsidiary companies - - 1,734 2,064
Guarantees given to banks for performance bonds granted to
jointly controlled entities 478 561 1,594 1,870
Guarantees given to banks to secure banking facilities granted
to jointly controlled entities 1,500 31,875 271,318 466,917
` 1,978 32,436 5,478,299 3,215,307



45. Financial RiSK manaGement OBJectiVeS anD POlicieS

The Group’s and the Company’s fnancial assets are categorised as loans and receivables except for other investments which are categorised
as available-for-sale and gross amount due from customers, accrued billings and prepayments which are categorised as other current assets.

The Group’s and the Company’s fnancial liabilities are categorised as fnancial liabilities measured at amortised cost except for gross
amount due to customers and progress billings which are categorised as other current liabilities.

The Group’s and the Company’s activities are exposed to a variety of fnancial risks, including interest rate risk, credit risk, foreign currency
exchange risk, liquidity and cash fow risks. The Group’s and the Company’s overall fnancial risk management objective is to minimise
potential adverse effects on the fnancial performance of the Group and the Company.

Financial risk management is carried out through risk review, internal control systems and adherence to the Group’s and the Company’s
fnancial risk management policies. The Board regularly reviews these risks and approves the policies covering the management of these
risks. The Group and the Company do not trade in derivative instruments.

(a) interest rate risk

The Group and the Company are exposed to interest rate risk which is the risk that a fnancial instrument’s value will fuctuate as a result
of changes in market interest rates.

Surplus funds are placed with licensed fnancial institutions to earn interest income based on prevailing market rates. The Group and
the Company manage its interest rate risks by placing such funds on short tenures of 12 months or less.

The Group’s and the Company’s policy is to borrow principally on a foating rate basis but to retain a proportion of fxed rate borrowings.
The objective of a mix of fxed and foating rate borrowings is to reduce the impact of a rise in interest rates and to enable savings to
be enjoyed if interest rates fall. The Group and the Company do not generally hedge interest rate risks. The Group and the Company
have a policy to ensure that interest rates obtained are competitive.
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