Annual Report 2011/12 - International Entertainment Corporation

Notes to the Consolidated Financial StatementsFor the year ended 31 March 20126. FINANCIAL INSTRUMENTS (Continued)(b) Financial risk management objectives and policies (Continued)Market risk (Continued)Currency risk (Continued)Sensitivity analysis (Continued)In the opinion of the management of the Group, the sensitivity analysis is unrepresentative of the inherent foreignexchange risk as the year end exposure does not reflect the exposure during the year.Interest rate riskFor the year ended 31 March 2012, the Group is exposed to the fair value interest rate risk in relation to itsfinancial assets at FVTPL (see note 18 for details) and loan receivable (see note 22 for details).For the year ended 31 March 2011, the Group is exposed to the fair value interest rate risk in relation to its fixedrateheld-to-maturity investments (see note 21 for details) and financial assets at FVTPL (see note 18 for details).The Group is also exposed to cash flow interest rate risk in relation to its variable-rate bank balances (detailsdisclosed in note 24). The Group does not have interest rate hedging policy. However, management of the Groupmonitors interest rate exposure and will consider hedging significant interest rate exposure should the need arise.Sensitivity analysisThe Group is exposed to cash flow interest rate risk in relation to variable-rate bank balances including bankbalances deposits in the banks in Hong Kong and in the Philippines. The sensitivity analysis below havebeen determined solely based on the exposure to interest rates for variable-rate time deposits in the banksin the Philippines at the end of the reporting period. The analysis is prepared assuming these bank balancesoutstanding at the end of the reporting period is outstanding for the whole year. A 50 basis points (2011: 50basis points) is used in estimating the potential change in interest rate and represents the assessment of thereasonably possible change in interest rates made by the management of the Group. If interest rates had been 50basis points higher/lower and all other variables were held constant, the Group’s post-tax profit would increase/decrease by approximately HK$2,158,000 (2011: HK$1,425,000).Management of the Group considers that the impact on the Group’s result in respect of the change in interestrate on the Group’s bank balances deposited in the banks located outside the Philippines is minimal as theprevailing interest rates of these bank balances are already at a low level.International Entertainment Corporation - Annual Report 2011/12 51