175
ANNUAL REPORT 2016
NOTES TOTHE FINANCIAL STATEMENTS
30 JUNE 2016
(Continued)
38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(iii) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of the financial instruments of the Group and of the Company would
fluctuate because of changes in market interest rates.
The exposure of the Group and of the Company to interest rate risk relates primarily to their interest-bearing borrowings on floating
rates. The Group does not use derivative financial instruments to hedge this risk.
Sensitivity analysis for interest rate risk
The following table demonstrates the sensitivity analysis of the Group and of the Company if interest rates at the end of each reporting
period changed by fifty (50) basis points with all other variables held constant:
Group
Company
2016
RM’000
2015
RM’000
2016
RM’000
2015
RM’000
Profit after tax
- increase by 0.5% (2015: 0.5%)
(585)
(497)
(75)
(46)
- decrease by 0.5% (2015: 0.5%)
585
497
75
46
The sensitivity is higher in 2016 than in 2015 because of increase in borrowings during the financial year. The assumed movement in
basis points for interest rate sensitivity analysis is based on current observable market environment.
