EXCEL FORCE MSC BERHAD Annual Report 2020

EXCEL FORCE MSC BERHAD - ANNUAL REPORT 2020 118 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2020 (CONT’D) 35. FINANCIAL INSTRUMENTS (CONT’D) (c) Fair value of financial instruments (Cont’d) The following table shows the valuation techniques used in the determination of fair values within Level 3, as well as key unobservable inputs used in the valuation method. Financial instruments not carried at fair value Type Description of valuation technique and inputs used Loan to a subsidiary company Discounted cash flows using a rate based on the current market rate of borrowing of the respective Group entities at the reporting date. Transfer between levels of fair value hierarchy There is no transfer between levels of fair value hierarchy during the financial year. 36. CAPITAL MANAGEMENT The Group’s and the Company’s objectives whenmanaging capital are to safeguard the Group’s and the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group and the Company monitors capital using a gearing ratio, which is net debt divided by total equity. The Group includes within net debt, trade and other payables and lease liabilities less cash and cash equivalents. The Group’s and the Company’s policy is to maintain a prudent level of gearing ratio that complies with debt covenants and regulatory requirements. The gearing ratios at the end of the reporting period are as follows: Group Company 2020 2019 2020 2019 RM RM RM RM Trade and other payables 5,663,750 3,100,043 5,503,368 2,978,665 Lease liabilities 1,005,317 353,091 1,005,317 353,091 6,669,067 3,453,134 6,508,685 3,331,756 Less: Cash and cash equivalents (22,853,401) (22,789,063) (22,125,361) (21,729,766) Excess fund (16,184,334) (19,335,929) (15,616,676) (18,398,010) Total equity 92,859,490 96,468,675 92,332,068 96,292,867 Gearing ratio (times) -* -* -* -* * The gearing ratio is not applicable as the Group and the Company have sufficient cash and cash equivalents to settle the liabilities as at the end of the financial year. There were no changes in the Group’s and the Company’s approach to capital management during the financial year.