DESTINI Annual Report 2019

NOTES TO THE FINANCIAL STATEMENTS 42. Financial Instruments (Cont’d) (c) Financial risk management objectives and policies (Cont’d) (iii) Market risks (Cont’d) (b) Interest rate risk The Group’s and the Company’s fixed rate deposits placed with licensed banks and borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The Group’s and the Company’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. The Group and the Company manage the interest rate risk of its deposits with licensed financial institutions by placing them at the most competitive interest rates obtainable, which yield better returns than cash at bank and maintaining a prudent mix of short and long term deposits. The Group and the Company manage its interest rate risk exposure from interest bearing borrowings by obtaining financing with the most favourable interest rates in the market. The Group and the Company constantly monitor its interest rate risk by reviewing its debts portfolio to ensure favourable rates are obtained. The Group and the Company do not utilise interest swap contracts or other derivative instruments for trading or speculative purposes. The carrying amounts of the Group’s and of the Company’s financial instruments that are exposed to interest rate risk are as follows: 2019 2018 RM RM Group Fixed rate instruments Financial liabilities Lease liabilities 21,416,387 2,447,516 Floating rate instruments Financial liabilities Bank borrowings 114,748,688 136,101,594 Company Floating rate instruments Financial liabilities Bank borrowings 24,546,499 38,270,672 Interest rate risk sensitivity analysis Fair value sensitivity analysis for fixed rate instruments The Group and the Company do not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rates at the end of the reporting period would not affect profit or loss. 06 FINANCIAL STATEMENTS DESTINI BERHAD 196