MS AR 2018 (1)

Rupees 2018 2017
Variable rate instruments
- Financial assets 160,504,863 598,270,190
- Financial liabilities 8,369,375,822 8,008,623,697
Sensitivity analysis:
Sensitivity to interest rate risk arises from mismatch of financial assets and financial liabilities that mature
or re-price in a given period.
Fair value sensitivity analysis for fixed rate instruments:
The Company does not account for any fixed rate financial instruments at fair value through profit or
loss, therefore, a change in interest rate at the reporting date would not affect the profit or loss.
Cash flow sensitivity analysis for variable rate instruments:
A change of 100 basis points in interest rates at reporting date would have increased / decreased profit
for the year by Rs. 85.299 million (2017: 86.069 million)
The related mark-up rates for variable rate financial instruments are indicated in the relevant notes to the
financial statements. The sensitivity analysis prepared is not necessarily indicative of the effects on the
profit for the period and assets / liabilities of the Company.
Interest rate risk management:
The Company manages these mismatches through risk management strategies where significant
changes in gap position can be adjusted. The Company’s significant borrowings are based on variable
rate pricing that is mostly dependent on Karachi Inter Bank Offer Rate (“KIBOR”) as indicated in
respective notes.
45.4 Fair value of financial instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating fair value of an asset or liability, the Company takes
into the characteristics of the asset or liability if market participants would take those characteristics into account
when pricing the asset or liability at the measurement date.
In addition, for financial reporting purposes, fair value measurements are categorized into level 1, 2 or 3 based on
the degree to which the inputs to the fair value measurements are observable and the significance of the inputs
to the fair value measurements in its entirety, which are described as follows:
Level 1 inputs - are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity
can access at the measurement date.
Level 2 inputs - these are inputs, other than quoted prices included within Level 1, that are observable for the
asset or liability, either directly or indirectly; and
Level 3 inputs - are unobservable inputs for the asset or liability.
Annual Report 2018
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