ANNUAL REPORT 2015
59
Notes to the Combined
Financial Statements
As at 30 September 2015
4
FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)
There has been no change to the Group’s exposure to these financial risks or the manner in which it manages and measures the
risk. Market risk exposures are measured using sensitivity analysis indicated below:
(i)
Foreign exchange risk management
The Group operates principally in Singapore and has operations in the People’s Republic of China, giving rise to some
exposures to market risk from changes in foreign exchange rates primarily with respect to Renminbi. The Group relies
on the natural hedges between such transactions.
The Group does not enter into any derivative contracts to hedge the foreign exchange risk on such net investments. The
Group’s monetary assets and monetary liabilities are largely denominated in the respective Group entities’ functional
currencies.
As the Group’s principal operations are in Singapore, it is not significantly exposed to foreign exchange risk and thus
foreign currency risk sensitivity analysis has not been disclosed.
(ii)
Interest rate risk management
The Group is not exposed to interest rate risk as there are no significant interest-bearing assets and liabilities except for
fixed deposits, structured fixed deposit, finance leases and bank borrowings. Further details can be found in Notes 6,
15, 17 and 18 to the financial statements respectively.
No sensitivity analysis is prepared as the Group does not expect any material effect on the Group’s profit or loss arising
from the effects of reasonably possible changes to interest rates on interest bearing financial instruments at the end of
the financial year.
(iii)
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group. The Group has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the
risk of financial loss from defaults.
The Group’s credit risk is primarily attributable to its cash and bank balances and trade receivables. Liquid funds are
placed with financial institutions with high credit ratings. The credit risk with respect to the trade receivables is limited
as the Group’s revenue are generated mainly from cash and credit card sales. Where transactions are conducted other
than on a cash basis, the Group practises stringent credit review. Allowance for impairment is made where there is an
identified loss event which, based on previous experience is evidence of a reduction in the recoverabilities.
The Group have no significant concentration of credit risk. Trade receivables are spread over a broad base of customers.
The carrying amount of financial assets recorded in the financial statements represents the Group’s maximum exposure
to credit risks.
Further details of credit risk on trade receivables are disclosed in Note 7 to the financial statements.
(iv)
Equity price risk management
The Group is exposed to equity risks arising from short term investments, equity investment and structured fixed
deposit, except for equity investment which is classified as available-for-sale as investments is unquoted, and is held for
strategic rather than trading purposes.
Further details of the short term investments, available-for-sale investment and structured fixed deposit are disclosed in
Notes 8, 11 and 15 to the financial statements respectively.
Equity price sensitivity
In respect of the short term investments, if equity price had been 10% higher/lower, the Group’s net profit for the year
ended 30 September 2015 would increase/decrease by $32,920 (2014 : $339,081).
