Quality - UAC Berhad

Notes to The Financial StatementsFor The Financial Year Ended 31 December 20053 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)nOperating leasesLeases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor areclassified as operating leases. Payments made under operating leases (net of any incentives received from thelessor) are charged to the income statement on the straight line basis over the lease period.4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIESThe Group's activities expose it to a variety of financial risks, including foreign currency exchange risk, interestrate risk, credit risk, liquidity and cash flow risk. The Group's overall financial risk management objective is toensure that the Group creates value for its shareholders. Financial risk management is carried out through riskreviews, internal control systems and a comprehensive insurance programme.iForeign currency exchange riskThe Group is exposed to foreign currency exchange risk as a result of the foreign currency transactionsdenominated in currencies other than Ringgit Malaysia. The currency giving rise to this risk is primarily US dollar.The Company is involved in financial instruments that help to reduce the risk of exposure to fluctuations onforeign currency receivables and payables. These are mainly foreign currency forward contracts and are notrecognised in the financial statements.iiInterest rate riskThe Group's income and operating cash flows are subject to insignificant exposure to fluctuations in interest rates.iii Credit riskThe Group manages credit risk by setting credit limits and ensuring that sales of products and services aremade to customers with an appropriate credit history. Where necessary, customers may also be requested toprovide security or advance payment. Exposure to credit risk is monitored on an ongoing basis.iv Liquidity and cash flow riskThe Group maintains sufficient cash, marketable securities and adequate credit facilities to ensure that ampleworking capital is available at any one time.UAC BERHAD (5149-H) (Incorporated in Malaysia) 59