EXCEL FORCE MSC BERHAD Annual Report 2019

EXCEL FORCE MSC BERHAD - ANNUAL REPORT 2019 112 notes to the financial statements 31 december 2019 (cont’d) 35. Financial Instruments (Cont’d) (b) Financial risk management objectives and policies (Cont’d) (iii) Market risks (Cont’d) (b) Foreign currency risk The Group is exposed to foreign currency risk on transactions that are denominated in currencies other than the respective functional currencies of Group entities. The currencies giving rise to this risk are primarily United States Dollar (USD) and Singapore Dollar (SGD). The Group has not entered into any derivative instruments for hedging or trading purposes. Where possible, the Group will apply natural hedging by selling and purchasing in the same currency. However, the exposure to foreign currency risk is monitored from time to time by management. The carrying amounts of the Group’s and of the Company’s foreign currency denominated financial assets and financial liabilities at the end of the reporting period are as follows: Denominated in USD SGD Group and Company RM RM 2019 Trade receivables - 24,722 Cash and bank balances 324,109 664 324,109 25,386 2018 Trade receivables - 177,687 Cash and bank balances 370,220 1,309 370,220 178,996 Foreign currency sensitivity analysis Foreign currency risk arises from Group entities which have a RM functional currency. The exposure to currency risk of Group entities which do not have a RM functional currency is not material and hence, sensitivity analysis is not presented. The following table demonstrates the sensitivity of the Group’s and the Company’s profit before tax for the financial year to a reasonably possible change in the USD and SGD exchange rates against the functional currencies of the Group and of the Company, with all other variables held constant. Group and Company 2019 2018 Change in currency rate Effect on profit before tax Change in currency rate Effect on profit before tax RM RM USD Strengthened 10% 32,411 Strengthened 10% 37,022 Weakened 10% (32,411) Weakened 10% (37,022) SGD Strengthened 10% 2,539 Strengthened 10% 17,900 Weakened 10% (2,539) Weakened 10% (17,900)