Maxis Berhad | Annual Report 2012

Maxis Berhad // Annual Report 2012 164 33 FINANCIAL RISK MANAGEMENT (CONTINUED) The Group and the Company have established financial risk management policies and procedures/mandates which provide written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk and use of derivative financial instruments. (a) Market risk Market risk is the risk that the fair value or future cash flow of the financial instruments that will fluctuate because of changes in market prices. The various components of market risk that the Group and the Company are exposed to are discussed below. (i) Foreign exchange risk The objectives of the Group’s and of the Company’s currency risk management policies are to allow the Group and the Company to effectively manage the foreign exchange fluctuation against its functional currency that may arise from future commercial transactions and recognised assets and liabilities. Forward foreign currency exchange contracts are used to manage foreign exchange exposures arising from all known material foreign currency denominated commitments as and when they arise and to hedge the movements in exchange rates by establishing the rate at which a foreign currency monetary item will be settled. Gains and losses on foreign currency forward contracts entered into as hedges of foreign currency monetary items are recognised in the financial statements when the exchange differences of the hedged monetary items are recognised in the financial statements. Cross currency interest rate swap contracts are also used to hedge the volatility in the cash flow attributable to variability in the foreign currency denominated borrowings from the inception to maturity of the borrowings. The currency exposure of financial assets and financial liabilities of the Group and of the Company that are not denominated in the functional currency of the respective companies are set out below. Currency risks in respect of intragroup receivables and payables have been included in the Group’s currency exposure table as this exposure is not eliminated at the Group level. Currency exposure at 31 December 2012 Group SGD USD SDR GBP Others RM’000 RM’000 RM’000 RM’000 RM’000 Functional currency Ringgit Malaysia Receivables 7 11,674 5,738 – 6 Deposits, bank and cash balances – 16,489 – – 37 Payables (466) (323,464) (17,390) (2,548) (2,215) Amounts due (to)/from related parties, net – (1,794) 4,856 – (1,385) Syndicated term loans – (2,583,174) – – – Term loans (174,030) (531,556) – – – Gross exposure (174,489) (3,411,825) (6,796) (2,548) (3,557) CCIRSs: - syndicated term loans – 2,583,174 – – – - term loans 174,030 531,556 – – – Net exposure (459) (297,095) (6,796) (2,548) (3,557) NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2012 Continued