Content2011 - PETRONAS Gas Berhad

Notes to the Financial Statements
31 MarCh 2011
32. Financial Instruments (Continued)
185 annUaL report 2011
Market Risk
Market risk is the risk or uncertainty arising from changes in market prices and their impact on the performance of the business. The market
price changes that the Group and the Company is exposed to include interest rates, foreign currency exchange rates and other indices that
could adversely affect the value of the Group’s and the Company’s fi nancial assets, liabilities or expected future cash fl ows.
Market risk is the risk that the fair value or future cash fl ows of a fi nancial instrument will fl uctuate because of changes in market prices.
Market prices comprise three types of risk: interest rate risk, currency risk and other price risk.
Financial instruments affected by market risk include loans and borrowings, deposits and derivative fi nancial instruments.
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash fl ows of a fi nancial instrument will fl uctuate because of changes in market
interest rates.
The Group’s investments in fi xed-rate debt securities are exposed to a risk of change in their fair value due to changes in interest rates.
All interest rate risks are monitored and managed proactively by PETRONAS Group Treasury Division based on guidance from Group Risk
Management Framework and Guideline.
The interest rate profi le of the Group’s and the Company’s interest-bearing fi nancial instruments based on carrying amount as at reporting
date is as follows:
2011 2010
Group/Company RM’000 RM’000
Financial assets
Fixed rate instruments 240,081 100,252
Floating rate instruments 35,001 –
275,082 100,252
As at 31 March 2011, 87% of the fi nancial instruments of the Group and the Company are fi xed rate instruments.
Since most of the Group’s and the Company’s fi nancial assets and liabilities are fi xed rate instruments measured at amortised cost, a change
in interest rate is not expected to have material impact on the Group’s and the Company’s profi t or loss.
Fair value sensitivity analysis for fi xed rate instruments
Sensitivity analysis for a given market variable provided in this note, discloses the effect on profi t or loss and equity as at 31 March 2011
assuming that a reasonably possible change in the relevant market variable had occurred at 31 March 2011 and been applied to the risk
exposures in existence at that date to show the effects of reasonably possible changes in price on profi t or loss and equity to the next annual
reporting date. Reasonably possible changes in market variables used in the sensitivity analysis are based on implied volatilities, where
available, or historical data for equity and commodity prices and foreign exchange rates. Reasonably possible changes in interest rates are
based on management judgment and historical experience.