Frontken Berhad Annual Report 2019

120 Frontken Corporation Berhad (651020-T) ANNUAL REPORT 2019 30. 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 to a reasonably possible change in the foreign currencies at the end of the reporting period, with all other variables held constant:- The Group The Company 2019 2018 2019 2018 Increase/ Increase/ Increase/ Increase/ (Decrease) (Decrease) (Decrease) (Decrease) RM RM RM RM Effects on profit after taxation/equity Singapore Dollar: - strengthened by 5% (17,363) (16,960) - - - weakened by 5% 17,363 16,960 - - United States Dollar: - strengthened by 5% 2,786,393 2,591,687 (50,095) (362,070) - weakened by 5% (2,786,393) (2,591,687) 50,095 362,070 Others*: - strengthened by 5% 262 569 - - - weakened by 5% (262) (569) - - * 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 hire purchase payables are carried at amortised cost. Therefore, they are not subject to interest rate risk as defined in MFRS 7 since neither carrying amounts nor the future cash flows will fluctuate because of a change in market interest rates. The Group’s exposure to interest rate risk based on the carrying amounts of the financial instruments at the end of the reporting period is disclosed in Note 25 to the financial statements. Interest Rate Risk Sensitivity Analysis An increase of 100 basis points in interest rates of floating rate term loans at the end of the reporting period would have decreased the Group’s profit after taxation by RM7,004 (2018: RM96,200). The analysis assumes that all other variables remain constant. A decrease of 100 basis points in the interest rates would have had an equal but opposite effect on the Group’s profit after taxation. The Company does not have any floating rate borrowings and hence, no sensitivity analysis is presented. Notes To The Financial Statements (cont’d)