Page 172 - S P Setia Annual Report 2013
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170 | Financial Statements S P SETIA BERHAD GROUP Annual Report 2013





NOTES TO THE FINANCIAL STATEMENTS

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






45. Financial RiSK manaGement OBJectiVeS anD POlicieS (cOnt’D)

(a) interest rate risk (cont’d)
Sensitivity analysis for interest rate risk

A sensitivity analysis has been performed based on the outstanding foating rate bank borrowings of the Group and the Company as
at 31 October 2013. If interest rates were to increase or decrease by 50 basis points with all other variables held constant, the Group’s
and the Company’s proft before tax would decrease or increase by RM5,594,000 and RM4,794,000 (2012 : RM5,557,000 and
RM4,495,000) respectively.

For those interest expense incurred and capitalised as part of the expenditure on investment property under construction, land held for
property development and property development costs during the fnancial year, if the interest rates were to increase or decrease by
50 basis points with all other variables held constant, those assets of the Group would increase or decrease by RM17,053,000 (2012 :
RM12,608,000).

(b) credit risk

Credit risk arises from the possibility that a counter party may be unable to meet the terms of a contract in which the Group and
the Company has a gain position.

The Group and the Company minimise and monitor its credit risk by dealing with credit worthy counter-parties and applying credit
approval controls for material contracts. If necessary, the Group and the Company may obtain collaterals from counter-parties as a
means of mitigating losses in the event of default.

In respect of trade receivables arising from the sale of development properties, the Group and the Company mitigate its credit risk by
maintaining its name as the registered owner of the development properties until full settlement by the purchaser of the self-fnanced
portion of the purchase consideration or upon undertaking of end-fnancing by the purchaser’s end-fnancier.

At the reporting date, the Group did not have any signifcant concentration of credit risk that may arise from exposure to a single debtor
or group of debtors.

Financial assets that are neither past due nor impaired

Information regarding trade receivables that are neither past due nor impaired is disclosed in note 19 above. Deposits with banks and
other fnancial institutions that are neither past due nor impaired are placed with or entered into with reputable fnancial institutions
with high credit ratings and no history of default.

(c) Foreign currency exchange risk

The Group is exposed to currency translation risk arising from its net investments in foreign operations, mainly United
Kingdom and Singapore.

Sensitivity analysis for foreign currency risk

The following table demonstrates the sensitivity of the Group’s equity to a reasonably possible change in the GBP and SGD exchange
rates against the respective functional currencies of the Group entities, with all other variables held constant.
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