BUILDING LANDMARKS, CHARTING GROWTH
245
Annual Report 2015
NOTES TO THE FINANCIAL STATEMENTS
26 FINANCIAL INSTRUMENTS
(continued)
Interest rate risk
(continued)
Exposure to interest rate risk
(continued)
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore,
a change in interest rates at the reporting date would not affect profit or loss.
Cash flow sensitivity analysis for variable rate instruments
An increase of 10 basis points in the interest rates at the reporting date would have decreased profit or loss (before any
tax effects) by $1.4 million for the Group and increased profit or loss (before any tax effects) by $0.2 million for the
Company. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. A decrease
of 10 basis points in the interest rates at the reporting date would have had the equal but opposite effect, on the basis
that all other variables remain constant. The Group and the Company are not exposed to significant interest rate risk in the
previous year.
Other market price risk
Risk management policy
Market price risk is the risk that the fair value of future cash flows of the Group’s financial instruments will fluctuate
because of changes in market prices (other than interest or exchange rates).
Equity price risk arises from available-for-sale financial assets. Management monitors its investment portfolio based on its
fair value and responds to fluctuation in market prices as and when necessary to optimise the Group’s return.
Sensitivity analysis
The Group and the Company are exposed to price changes from its quoted equity securities. If the fair value of the
investments were to increase/decrease by 10% at the reporting date, fair value reserve would increase/decrease by
approximately $4.9 million.
Capital management
The primary objective of the Group’s capital management is to ensure that it maintains an optimal capital structure so
as to maximise shareholders’ value. Capital consists of all equity.
The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions.
To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to
shareholders, issue new shares, and obtain new borrowings to leverage on lower cost of borrowings versus the Group’s
weighted average cost of capital or sell assets to reduce borrowings.
Management monitors capital based on a set of financial ratios with the primary focus on gearing ratio.
The gearing ratio is calculated as net debt divided by total equity. Net debt is calculated as borrowings less cash and
cash equivalents.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
