Financial Report Template Page 64
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80NOTES TO THE FINANCIAL STATEMENTS
(CONT)
FOR THE YEAR ENDED 30 JUNE 2015
NOTE 32 FINANCIAL RISK MANAGEMENT CONT.
c.
Market Risk
i.
Interest rate risk
Exposure to interest rate risk arises on financial assets and financial liabilities recognised at the end of the reporting period whereby a
future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. The Group is also
exposed to earnings volatility on floating rate instruments. The financial instruments that primarily expose the Group to interest rate
risk are borrowings and cash and cash equivalents.
The net effective variable interest rate borrowings (i.e. unhedged debt) expose the group to interest rate risk which will impact future
cash flows and interest charges and is indicated by the following floating interest rate financial liabilities:
Consolidated Group
2015
2014
Note
$
$
Floating rate instruments
Bank Borrowings
22
19,901,362
14,760,519
19,901,362
14,760,519
ii. Foreign exchange risk
Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial instrument fluctuating due to
movement in foreign exchange rates of currencies in which the Group holds financial instruments which are other than the AUD
functional currency of the Group.
The foreign currency risk in the group is currently considered immaterial and is therefore not shown.
The Group’s loan to its associate, Risk Worldwide New Zealand Ltd is denominated in Australian Dollars.
Sensitivity Analysis
The following table illustrates sensitivities to the Group’s exposures to changes in interest rates. The table indicates the impact on how
profit and equity values reported at the end of the reporting period would have been affected by changes in the relevant risk variable
that management considers to be reasonably possible.
These sensitivities assume that the movement in a particular variable is independent of other variables.
Consolidated Group 2015
Consolidated Group 2014
Profit
Equity
Profit
Equity
Year ended 30 June 2015
$
$
$
$
+/-1% in interest rates
133,306
133,306
110,445
110,445
There have been no changes in any of the methods or assumptions used to prepare the above sensitivity analysis from the prior year.
Fair Values
Fair value estimation
Fair value is the amount at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an
arm’s length transaction.
Fair values derived may be based on information that is estimated or subject t o judgment, where changes in assumptions may have a
material impact on the amounts estimated. Areas of judgment and the assumptions have been detailed on the following page. Where
possible, valuation information used to calculate fair value is extracted from the market, with more reliable information available from
markets that are actively traded.
SHINE CORPORATE LTD | FINANCIAL REPORT | 2015
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