40. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D.) (c) Interest rate risk Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s primary interest rate risk relates to interest-bearing borrowings. The investments in financial assets including fixed deposits are mainly short-term in nature and they are not held for speculative purposes. The Group manages its interest rate exposure by using a mix of fixed and floating rate debts and actively reviewing its debt portfolio, taking into account the investment holding period and nature of its assets. Interest rate sensitivity The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, of the Group’s and of the Company’s (loss)/profit before tax (through the impact on floating rate borrowings). 2021 2020 RM’000 RM’000 Group Borrowings denominated in Ringgit Malaysia Interest rates increase by 25 basis point (Loss)/profit before tax will be higher/(lower) by 9,868 (9,073) Interest rates decrease by 25 basis point (Loss)/profit before tax will be (lower)/higher by (9,868) 9,073 Company Borrowings denominated in Ringgit Malaysia Interest rates increase by 25 basis point Loss before tax will be higher by 4,558 4,182 Interest rates decrease by 25 basis point Loss before tax will be (lower) by (4,558) (4,182) 40. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D.) (d) Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group has transactional currency exposures arising from balances in other payables in a currency other than the functional currencies of the Group. The foreign currencies in which these transactions are denominated in are US Dollar, Singapore Dollar and Renminbi. The Group’s foreign currency risk management objective is to minimise foreign currency exposure that gives rise to economic impact, both at transaction and reporting period translation levels. The Group and the Company are not exposed to significant foreign currency risk as the majority of the Group’s and of the Company’s transactions, assets and liabilities are denominated in the functional currencies of the respective entities within the Group. 41. OPERATING LEASE ARRANGEMENTS The Group as lessor The Group has entered into non-cancellable operating lease agreements on its investment property portfolio. These leases have remaining non-cancellable lease terms of between 1 to 10 years. Future minimum rentals receivable under non-cancellable operating leases at the reporting date are as follows: Group 2021 2020 RM’000 RM’000 Not later than 1 year 48,059 49,895 Later than 1 year and not later than 5 years 34,991 74,148 Later than 5 years – 12,583 83,050 136,626 FINANCIAL STATEMENTS NOTES TO THE For the financial year ended 31 December 2021 Annual Report 2021 TROPICANA CORPORATION BERHAD FINANCIAL STATEMENTS AND OTHER INFORMATION 340 341
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