Frontken Berhad Annual Report 2017

113 Frontken Corporation Berhad (651020-T) ANNUAL REPORT 2017 27. FINANCIAL INSTRUMENTS (CONT’D) (a) Financial Risk Management Policies (Cont’d) (i) Foreign currency risk (Cont’d) Foreign Currency Risk Sensitivity Analysis The following table details the sensitivity analysis on profit after taxation to a reasonably possible change in the foreign currencies as at the end of the reporting period, with all other variables held constant:- The Group The Company 2017 2016 2017 2016 Increase/ Increase/ Increase/ Increase/ (Decrease) (Decrease) (Decrease) (Decrease) RM RM RM RM Effects on profit after taxation/equity Singapore Dollar: - strengthened by 5% (14,623) 97,131 (2,339) (40,068) - weakened by 5% 14,623 (97,131) 2,339 40,068 United States Dollar: - strengthened by 5% 3,311,300 1,979,004 (23,841) (246,750) - weakened by 5% (3,311,300) (1,979,004) 23,841 246,750 Others*: - strengthened by 5% 584 571 61,883 78,938 - weakened by 5% (584) (571) (61,883) (78,938) * Denominated in Euro, Great Britain Pound and Indonesian Rupiah. (ii) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to interest rate risk arises mainly from long-term borrowings with variable rates. The Group’s policy is to obtain the most favourable interest rates available and by maintaining a balanced portfolio of mix of fixed and floating rate borrowings. The Group’s fixed deposits with licensed banks and borrowings are carried at amortised cost. Therefore, they are not subject to interest rate risk as defined in MFRS 7 since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates. The Group’s exposure to interest rate risk that based on the carrying amounts of the financial instruments at the end of the reporting period is disclosed in Notes 22 and 25 to the financial statements. Interest rate risk sensitivity analysis The Group and the Company do not account for any fixed rate financial assets and liabilities at fair value through profit or loss, a 100 basis points strengthening in the interest rate as at the end of the reporting period would have decreased profit after taxation by RM319,579 (2016 : RM248,535) and RM15,488 (2016 : RM31,377) respectively. A 100 basis points weakening would have had an equal but opposite effect on the profit after taxation. This assumes that all other variables remain constant. Notes To The Financial Statements (cont’d)