KIM HENG OFFSHORE & MARINE HOLDINGS LIMITED
86
Notes to the financial statements
15 Financial risk management (Cont’d)
Interest rate risk
The Group is exposed to changes in interest rates primarily due to the Group’s loans and borrowings which
are subject to variable interest rates. Interest rate risk is managed by the Group on an ongoing basis with
the primary objective of limiting the extent to which net interest expense could be affected by an adverse
movement in interest rates.
At the reporting date, the interest rate profile of the Group’s and the Company’s interest bearing financial
instruments, as reported to the management, was as follows:
Group
Company
2015
2014
2015
2014
$’000
$’000
$’000
$’000
Fixed rate instruments
Fixed rate loans
(3,530)
(2,705)
–
–
Finance lease liabilities
(10,230)
(1,860)
–
–
(13,760)
(4,565)
–
–
Variable rate instruments
Fixed deposits
22,944
26,193
22,245
25,231
Floating rate loans
(10,094)
(3,562)
–
–
12,850
22,631
22,245
25,231
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets or liabilities at fair value through profit or loss.
Therefore, in respect of the fixed rate instruments, a change in interest rates at the reporting date would not
affect profit or loss.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have (decreased)/increased the (loss)/
profit before tax of the Group and the Company by the amounts shown below. This analysis assumes that all
other variables, in particular foreign currency rates, remain constant.
Group
Company
2015
2014
2015
2014
$’000
$’000
$’000
$’000
100 bp increase
Variable rate instruments
(129)
(226)
(222)
(252)
100 bp decrease
Variable rate instruments
129
226
222
252
