Directors' Report - Alibaba

NOTES TO THE FINANCIAL STATEMENTS
For the year ended December 31, 2010
36 RELATED PARTY TRANSACTIONS (Continued)
(d) Key management personnel compensation
Remuneration for key management personnel represented amounts paid to the Company’s directors as disclosed in Note
10.
37 FINANCIAL RISK MANAGEMENT
The Group’s major financial assets and liabilities include cash and cash equivalents, time deposits, available-for-sale investments,
prepayments, deposits and other receivables, amounts due from/to related companies, trade payables, other payables and accruals
and short-term bank borrowings. The details of these financial assets and financial liabilities are disclosed in the respective notes
to the financial statements. The risks associated with these financial assets and liabilities and the policies on how to mitigate these
risks are set out below. The Group’s management regularly monitors the exposures and implements timely and effective policies
to mitigate potential risks.
(a) Currency risk
Currency risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign
operations. Although the Group operates businesses in different countries, substantially all of the revenue-generating
and expense-related transactions are denominated in Renminbi which is the functional currency of the Company and the
Group’s key operating subsidiaries. Renminbi is not freely convertible into other currencies. All foreign currency exchange
transactions in the PRC must be effected through the State Administration of Foreign Exchange.
Sensitivity analysis
As of December 31, 2010, most of the foreign currency denominated monetary assets and liabilities being held by the
Group were denominated in United States dollars and Hong Kong dollars (2009: same). As of December 31, 2010, if
Renminbi had strengthened/weakened 2% against United States dollars and Hong Kong dollars with all other variables held
constant, profit attributable to equity owners for the year would have been increased/decreased by RMB27,241,000 (2009:
decreased/increased RMB5,574,000) as a result of foreign exchange gains/losses on translation of United States dollars and
Hong Kong dollars denominated monetary assets and liabilities.
Exchange differences arising from translation of results and financial positions of certain Group companies from functional
currencies to the presentation currency are dealt with as a movement in exchange reserve. As of December 31, 2010, if
Renminbi had strengthened/weakened 2% against United States dollars with all other variables held constant, the Group’s
equity would have been decreased/increased by RMB12,627,000 (2009: RMB18,612,000).
(b) Interest rate risk
The Group’s exposure to changes in interest rates is mainly attributable to its interest-bearing assets including all cash and
cash equivalents, term deposits with original maturities of over three months as well as the short-term bank borrowings
obtained during the year.
Sensitivity analysis
As of December 31, 2010, if the interest rate increased/decreased by 50 basis-point with all other variables held constant,
profit attributable to equity owners of the Company would have been RMB47,833,000 (2009: RMB36,044,000) higher/
lower, mainly as a result of higher/lower interest income on bank balances.
Alibaba.com Limited Annual Report 2010
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