Maxis Berhad | Annual Report 2013

Maxis Berhad | Annual Report 2013 152 33 FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Market risk (continued) (i) Foreign exchange risk (continued) The sensitivity of the Group’s and of the Company’s profit before tax for the financial year and equity to a reasonably possible change in the USD exchange rate against the Group’s and the Company’s functional currency, RM, with all other factors remaining constant and based on the composition of assets and liabilities at the reporting date are set out as below. IMPACT ON PROFIT BEFORE TAX FOR THE FOR THE FINANCIAL YEAR IMPACT ON EQUITY (1) GROUP COMPANY GROUP AND COMPANY 2013 2012 2013 2012 2013 2012 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 USD/RM - strengthened 5% (2012: 5%) (12,598) (14,855) – – 8,930 11,040 - weakened 5% (2012: 5%) 12,598 14,855 – – (8,930) (11,040) Note: (1) Represents cash flow hedging reserve The impacts on profit before tax for the financial year are mainly as a result of foreign currency gains/losses on translation of USD denominated receivables, deposits, bank balances and payables. For USD denominated borrowings, as these are effectively hedged, the foreign currency movements will not have any impact on the statements of profit or loss. Other balances denominated in foreign currencies are not significant and hence, profit is not materially impacted. (ii) Interest rate risk The Group’s and the Company’s interest rate risk arises from deposits with licensed banks, deferred payment creditors, borrowings, loan from a related party and inter-company loans carrying fixed and variable interest rates. The objectives of the Group’s and of the Company’s interest rate risk management policies are to allow the Group and the Company to effectively manage the interest rate fluctuation through the use of fixed and floating interest rates debt and derivative financial instruments. The Group and the Company adopt a non- speculative stance which favours predictability over interest rate fluctuations. The interest rate profile of the Group’s and of the Company’s borrowings are also regularly reviewed against prevailing and anticipated market interest rates to determine whether refinancing or early repayment is warranted. The Group and the Company manage their cash flow interest rate risk by using cross currency interest rate swap contracts and interest rate swap contracts. Such swaps have the economic effect of converting certain borrowings from floating rates to fixed rates. NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2013 Continued