TUNG LOK RESTAURANTS (2000) LTD / Annual Report
2016
89
Notes to the financial statements
For the financial year ended 31 March 2016
33.
Financial risks management objectives and policies
The Group has documented financial risk management policies. These policies set out the Group’s overall business
strategies and its risk management philosophy. The Group’s overall financial risk management programme seeks to
minimise potential adverse effects of financial performance of the Group. Management provides written principles for
overall financial risk management and written policies covering specific areas, such as market risk (including interest
rate risk and foreign exchange risk), credit risk, liquidity risk and investing excess cash.
The Group does not hold or issue derivative financial instruments for speculative purposes.
There has been no change to the Group’s exposure to these financial risks or the manner in which it manages and
measures the risk. Financial risk exposures are measured using sensitivity analysis indicated below.
(a)
Foreign exchange risk management
The Group operates principally in Singapore and has some operations in the People’s Republic of China, giving
rise to some exposures to market risk from changes in foreign exchange rates primarily with respect to Renminbi.
The Group relies on the natural hedges between such transactions.
The Group has some investments in foreign entities whose net assets are denominated in Renminbi.
The Group does not enter into any derivative contracts to hedge the foreign exchange risk on such net
investments. The Group’s monetary assets and monetary liabilities are largely denominated in the respective
Group entities’ functional currencies.
As the Group’s principal operations are in Singapore, it is not significantly exposed to foreign exchange risk and
thus foreign currency risk sensitivity analysis has not been disclosed.
(b)
Interest rate risk management
The Group’s exposure to interest rate risks relate mainly to its bank loans of $3,276,230 (2015: $5,249,376). The
interest rates are determined at the respective banks’ prime rate plus an applicable margin. The Group currently
does not use any derivative financial instruments to manage its exposure to changes in interest rates.
Interest rate sensitivity
The sensitivity analysis below has been determined based on the exposure to interest rates for instruments at
the end of the reporting period and the stipulated change taking place at the beginning of the financial year and
held constant throughout the reporting period in the case of instruments that have floating rates. A 50 basis
point increase or decrease is used when reporting interest rate risk internally to key management personnel and
represents management’s assessment of the possible change in interest rates.
If interest rates had been 50 basis points higher or lower and all other variables were held constant, the Group’s
profit for the year ended 31 March 2016 would decrease/increase by approximately $16,400 (2015: loss for the
year ended 31 March 2015 would increase/decrease by $26,200) respectively. This is mainly attributable to the
Group’s exposure to interest rates on its variable rate borrowings.
