Annual Report - Ahli United Bank

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Annual Report - Ahli United Bank

33 MARKET RISK (continued)b. Market risk-non-trading (continued)Equity price riskEquity price risk arises from fluctuations in equity indices and prices. The Board has set limits on the amount and type of investmentsthat may be accepted. This is monitored on an ongoing basis by the Group Investment Committee. The non-trading equity pricerisk exposure arises from the Group’s investment portfolio.The effect on equity valuations (as a result of a change in the fair value of equity investments held as available-for-sale) due to areasonably possible change in equity indices, with all other variables held constant is as follows:2009 2008Change inequity Effect on Effect onindices equity equityMarket indices % US$ ’000 US$ ’000Bahrain Stock Exchange +10% - 591Doha Securities Market +10% 606 235Saudi Stock Exchange +10% - 652Kuwait Stock Exchange +10% 1,616 2,462Abu Dhabi Stock Exchange +10% - 332Sensitivity to equity price movements will be on a symmetric basis, as financial instruments giving rise to non-symmetricmovements are not significant.34 FAIR VALUE OF FINANCIAL INSTRUMENTSThe fair value of financial instruments, with the exception of unquoted equity investments that are carried at cost and held to maturityinvestments, approximate their carrying values.The Group’s primary medium and long-term financial liabilities are the term debts and subordinated liabilities. The fair values of thesefinancial liabilities are not materially different from their carrying values, since these liabilities are repriced at intervals of three or sixmonths, depending on the terms and conditions of the instrument and the resultant applicable margins approximate the currentspreads that would apply for borrowings with similar maturities.The fair value of unquoted equity investments cannot be determined with sufficient accuracy, as future cash flows are not determinable.The Group has unquoted equity investments carried at cost amounting to US$ 123.8 million (31 December 2008: US$ 79.7 million)where the impact of changes in equity prices will only be reflected when the investment is sold or deemed to be impaired, whenthe consolidated statement of income will be impacted; or when a material third party transaction in the investment gives a reliableindication of fair value which will be reflected in equity.The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:-Level 1 : Quoted (unadjusted) prices in active markets for identical assets or liabilitiesLevel 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directlyor indirectly.Level 3 : techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.AUB Annual Report 200995

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