AL-SALAM REIT ANNUAL REPORT 2017

AL-SALĀM REIT ANNUAL REPORT 2017 159 (c) Financing Rate Risk Management Financing rate risk is the risk that the fair value or future cash flows of the Fund’s financial instruments will fluctuate because of changes in the market financing rates. The Fund manages its financing rate exposure by maintaining matching its cash flows from rental income and fixed rate profit bearing deposits with the Fund’s variable rate profit bearing borrowings. The Fund places cash deposits on a short-term basis and therefore allows the Fund to respond to significant changes of financing rate promptly. Financing rate sensitivity analysis The sensitivity analysis below has been determined based on the exposure to financing rates on the Fund’s variable rate profit bearing borrowings. The analysis is prepared assuming the amount of variable rate profit bearing borrowings outstanding at the end of the reporting period was outstanding for the whole year. A 25 basis point increase or decrease is used for the analysis and this represents management’s assessment of reasonable possible change in financing rate. If financing rates had been 25 basis point higher/lower and all other variables were held constant, the Fund’s net profit/total comprehensive income for the year would decrease/increase by RM882,750 (2016: RM875,000). The assumed movement in basis points for financing rate sensitivity analysis is based on the currently observable market environment. 23. SEGMENT REPORTING Segment information is presented in respect of the Fund’s business segments based on the nature of the industry of the Fund’s investment properties, which reflect the Fund’s internal reporting structure that are regularly reviewed by the Fund’s chief operating decision maker for the purposes of allocating resources to the segment and assessing its performance. For management purposes, the Fund is organised into the following operating divisions: • Retail outlets • Office buildings • Food and beverage (“F&B”) properties comprising restaurant and non-restaurant outlets • Others comprising Fund level operations No information on geographical areas is presented as the Fund operates solely in Malaysia. The accounting policies of the reportable segments below are the same as the Fund’s accounting policies described in Note 3. NOTES TO THE FINANCIAL STATEMENTS - CONT’D