Hatching For The Future - teo seng capital berhad

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Teo Seng Capital Berhad Notes To The Financial Statements For The Financial Year Ended 31 March 2012 36. FINANCIAL INSTRUMENTS (cont’d) 36.1 Financial Risk Management Policies (cont’d) (a) Market risk (cont’d) (i) Foreign currency risk (cont’d) Singapore United States Ringgit Dollar Dollar Others Malaysia Total RM RM RM RM RM Group - 2011 Financial assets Other investments - - - 5,080 5,080 Trade and other receivables 6,705,823 424 - 12,674,759 19,381,006 Deposits, bank and cash balances 4,885,441 2,510 19,105 17,984,086 22,891,142 11,591,264 2,934 19,105 30,663,925 42,277,228 Financial liabilities Trade and other payables (1,943,835) (2,644,913) (17,500) (14,198,716) (18,804,964) Bank borrowings - - - (47,676,485) (47,676,485) Hire purchase payables (253,749) - - (8,086,006) (8,339,755) (2,197,584) (2,644,913) (17,500) (69,961,207) (74,821,204) Net financial assets/(liabilities) 9,393,680 (2,641,979) 1,605 (39,297,282) (32,543,976) Less : Net financial (assets)/ liabilities denominated in the respective entities functional currencies (1,280,213) - - 39,297,282 38,017,069 Forward foreign exchange contracts (contracted notional principal) - 309,326 - - 309,326 Currency exposure 8,113,467 (2,332,653) 1,605 - 5,782,419 Foreign currency risk sensitivity analysis The following table details the sensitivity analysis to a reasonably possible change in the foreign currencies at the end of the reporting period, with all other variables held constant : Group 2012 2011 Increase/ Increase/ (Decrease) (Decrease) RM RM Annual Report 2012 88 Effects on profit after tax Singapore Dollar - strengthened by 5% 41,533 304,255 - weakened by 5% (41,533) (304,255) United States Dollar - strengthened by 5% (42,500) (87,474) - weakened by 5% 42,500 87,474
Teo Seng Capital Berhad Notes To The Financial Statements For The Financial Year Ended 31 March 2012 36. FINANCIAL INSTRUMENTS (cont’d) 36.1 Financial Risk Management Policies (cont’d) (a) Market risk (cont’d) (ii) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to interest rate risk arises mainly from interest-bearing financial assets and liabilities. The Group’s policy is to obtain the most favourable interest rates available. Any surplus funds of the Group will be placed with licensed financial institutions to generate interest income. Information relating to the Group’s exposure to the interest rate risk of the financial liabilities is disclosed in Note 36.1(c). Interest rate risk sensitivity analysis A 50 basis points increase/decrease in the interest rate at the end of the reporting period would have immaterial impact on the profit or loss. This assumes that all other variables remain constant. (iii) Equity price risk The Group’s principal exposure to equity price risk arises mainly from changes in quoted investment prices. The Group manages its exposure to equity price risk by maintaining a portfolio of equities with different risk profiles. Equity price risk sensitivity analysis A 50 basis points increase/decrease in the equity price risk at the end of the reporting period would have immaterial impact on the profit or loss. This assumes that all other variables remain constant. (b) Credit risk The Group’s exposure to credit risk, or the risk of counterparties defaulting, arises mainly from trade and other receivables. The Group manages its exposure to credit risk by the application of credit approvals, credit limits and monitoring procedures on an ongoing basis. For other financial assets (including quoted investments, deposits, bank and cash balances and derivatives), the Group minimises credit risk by dealing exclusively with high credit rating counterparties. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of the trade and other receivables as appropriate. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. Impairment is estimated by management based on prior experience and the current economic environment. The Company’s exposure to credit risk arises from unsecured financial guarantee provided to licensed institutions for credit facilities granted to its subsidiaries. The Company monitors on an ongoing basis the results of the subsidiaries and repayments made by the subsidiaries. Credit risk concentration profile At the end of the reporting period, there were no significant concentrations of credit risk other than the trade amounts due from related companies and related parties of RM 5,231,475 (2011 : RM 2,852,544). Annual Report 2012 89
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