218 Annual Report 2022 Notes to the Financial Statements For the Financial Year Ended 30 September 2022 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D) 44. Foreign currency risk (Cont’d) (iii) 2022 RM The Group 2021 RM Profit for the financial year 1,924,900 USD/IDR (1,924,900) 100,500 Strengthened 5% (100,500) Weakened 5% 2022 RM The Group 2021 RM Translation reserve IDR/RM 9,882,200 13,325,800 Strengthened 5% (9,882,200) (13,325,800) Weakened 5% RMB/RM 983,400 (983,400) 1,054,400 Strengthened 3% (1,054,400) Weakened 3% Sensitivity analysis for foreign currency risk (Cont’d) Interest rate risk (iv) Interest rate risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market interest rates. The Group’s exposure to interest rate risk relates to interest bearing financial assets and financial liabilities. Interest bearing financial assets include finance lease receivables, loan receivables, short-term placements and deposits with licensed banks. Deposits are placed for better yield returns than cash at banks and to satisfy conditions for bank guarantee. The Group’s interest bearing financial liabilities comprise hire-purchases, bank overdrafts, revolving credits and term loans. The fixed deposits placed with licensed banks and loan receivables at fixed rate exposes the Group to fair value interest rate risk. The short-term placements, bank overdrafts, revolving credits and term loans totalling RM313,197,628 (2021: RM471,500,336) at floating rate expose the Group to cash flow interest rate risk whilst hire-purchases of RM1,735,682 (2021: RM789,965) at fixed rate expose the Group to fair value interest rate risk. The Group manages its interest rate exposure by maintaining a prudent mix of fixed and floating rate borrowings. The Group also actively reviews its debts portfolio to ensure favourable rates are obtained, taking into account the investment holding period and nature of assets. As at the reporting date, a change of 50 basis points in interest rates, with all other variables held constant, would decrease/increase the total equity and profit after tax by approximately RM1,190,200 (2021: RM1,791,700), arising mainly as a result of higher/lower interest expense on floating rate loans and borrowings.
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