ZaraAnnual-English2010

Consolidated Financial Statements | Notes To The Consolidated Financial Statements December 31, 2010 Annual Report 2010
29.
RISK MANAGEMENT
Interest rate risk
The Group is exposed to interest rate risk on its interest bearing assets and liabilities such as bank deposits, overdrafts and loans.
The sensitivity of the consolidated statement of income is the effect of the assumed changes in interest rates on the Group’s profit
for one year, based on financial assets and liabilities bearing floating interest rates.
The following table demonstrates the sensitivity of the consolidated statement of income to reasonably possible changes in
interest rates with all other variables held constant.
Equity price risk
The following table demonstrates the sensitivity of the income statement and the cumulative change in fair value to reasonably
possible changes in equity prices, with all other variables held constant.
Increase
in Market Index
2010 % JD
Effect on the consolidated statement of
comprehensive income and equity
Amman Stock Exchange 10 2,283,259
Increase in Interest Rate
Effect on Profit for the year
2010 Basis Points JD
JD 75 (378,781)
USD 75 (297,708)
Increase in Interest Rate
Effect on Profit for the year
2009 Basis Points JD
JD 75 (419,768)
USD 75 (267,297)
The effect of decrease in interest rate is expected to be equal and opposite to the effect of the increase shown above.
The effect of decreases in equity prices is expected to be equal and opposite to the effect of the increases shown.
Credit risk
Increase
in Market Index
2009 % JD
Amman Stock Exchange 10 2,307,103
Effect on the consolidated statement of
comprehensive income and equity
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur
a financial loss. The Group is exposed to credit risk on its bank balances, receivables and certain other assets as reflected in the
balance sheet.
The Group seeks to limit its credit risk with respect to banks by only dealing with reputable banks and with respect to customers
by setting credit limits for individual customers and monitoring outstanding receivables.
The Group provides services to large number of customers. No single customer accounts for more than 10% of outstanding
accounts receivable at 31 December 2010.
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