ANNUAL REPORT 2012 - Wawasan TKH Holdings Berhad

WAWASAN TKH HOLDINGS BERHAD (540218-A)
ANNUAL REPORT 2012
091
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2012 (cont’d)
27. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d)
(iii) 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 would fluctuate because of changes in market interest rates.
The Group’s primary interest rate risk relates to interest-earning deposits and interest-bearing borrowings
from financial institutions. The Group’s fixed-rate deposits and borrowings are not exposed to risk of
changes in their fair values due to changes in interest rates. The Group’s floating rate borrowings are
exposed to risk of changes in cash flows due to changes in interest rates. Short term receivables and
payables are not exposed to interest rate risk. There is no formal hedging policy with respect to interest
rate exposure.
Sensitivity analysis for interest rate risk
As at 31 December 2012, if interest rates at the date had been 100 basis points lower with all other
variables held constant, the Group’s and the Company’s loss after tax for the year would have been
lower by approximately RM397,000 (2011: RM749,000) and RM21,000 (2011: RM325,000) respectively,
arising mainly as a result of lower interest expenses on borrowings and amount owing to a related party.
If interest rates had been 100 basis points higher with all other variables held constant, the Group’s and
the Company’s loss after tax for the year would have been higher by approximately RM400,000 (2011:
RM756,000) and RM21,000 (2011: RM325,000) respectively, arising mainly as a result of higher interest
expenses on borrowings and amount owing to a related party. The assumed movement in basis point
for interest rate sensitivity analysis is based on currently observable market environment.