Annual Report 2011 - Goodbaby International Holdings Limited

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NOTES TO FINANCIAL STATEMENTS 31 December 2011 40.FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued) 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. The Group has transactional currency exposure. This exposure arises from sales or purchases by operating units in currencies other than the units’ functional currencies. The Group enters into forward exchange contracts in order to manage this exposure. Other than the operating units’ functional currencies, the currency which has significant transactional currency exposure is the US dollar. The Group’s exposure to foreign currency changes for all other currencies is not material. The following table demonstrates the sensitivity at the end of the reporting period to a reasonably possible change in the United States dollar (“US$”) exchange rate, with all other variables held constant, of the Group’s profit before tax (due to changes in the fair value of monetary assets and liabilities). gb international Increase/ Increase/decrease (decrease) in in US$ rate profit before tax (HK$’000) Year ended 31 December 2011 If US$ strengthens against RMB +5% (3,314) If US$ weakens against RMB -5% 3,314 Year ended 31 December 2010 If US$ strengthens against RMB +5% (4,972) If US$ weakens against RMB -5% 4,972 The effect on the profit before tax is a result of a change in the fair value of derivative financial instruments not designated in a hedging relationship and monetary assets and liabilities denominated in US$, where the functional currency of the operating unit is a currency other than the US$. Although the derivatives have not been designated in a hedge relationship, they act as an economic hedge and will offset the underlying transactions when they occur. A reasonably possible change of 5% in the US$ exchange rate has no impact on the Group’s equity other than retained earnings.
NOTES TO FINANCIAL STATEMENTS 31 December 2011 40.FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued) Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. / 153 The Group trades only with recognised, creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. Concentration of credit risk exists when changes in economic, industrial or geographic factors similarly affect groups of counterparties whose aggregate credit exposure is significant in relation to the Group’s total credit exposure. The Group has a significant concentration of customers and credit risk as 76% (2010:69%) in North America and Europe. In view of the good credit histories of these customers, no significant default occurred in the year. With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents, other receivables and amounts due from related parties, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amounts of these instruments. Liquidity risk The Group monitors its exposure to liquidity risk by monitoring the current ratio, which is calculated by comparing the current assets with the current liabilities. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans. The Group’s policy is that all the borrowings should be approved by the chief financial officer.
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gbinternational.com.hk
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CORPORATE INFORMATION gb internatio
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CORPORATE INFORMATION DIRECTORS Exe
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7 Chairman’s Statement
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Dear Shareholders, I wish to presen
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Looking forward, the Group will con
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OVERVIEW For the financial year end
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) Our OBM model was systematically
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FINANCIAL REVIEW — CONTINUING OPE
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Cost of Sales, Gross Profit and Gro
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Income Tax Expense Our income tax e
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Pledge of Assets As at 31 December
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gb international
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The Board is pleased to present thi
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development efforts of the Company
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Specific enquiry has been made of a
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The key elements of the Group’s i
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gb international
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The Directors are pleased to presen
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pursuant to which each of the Coven
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Directors’ Interest in the Shares
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During the year under review, the t
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DISCLOSURE UNDER RULE 13.20 OF THE
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INDEPENDENT AUDITORS’ REPORT We b
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CONSOLIDATED STATEMENT OF COMPREHEN
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CONSOLIDATED STATEMENT OF FINANCIAL
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CONSOLIDATED STATEMENT OF CASH FLOW
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STATEMENT OF FINANCIAL POSITION 31
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NOTES TO FINANCIAL STATEMENTS 31 De
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