95
Annual Report 2015
TEHO INTERNATIONAL INC LTD.
28 FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS (CONT’D)
Interest rate risk (cont’d)
Sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value
through profit or loss. Therefore a change in interest rates at the reporting date would not
affect profit or loss.
Sensitivity analysis for variable rate instruments
The variable rate debt obligations are with interest rates that are re-set regularly at one,
three or six month intervals. A change of 100 basis points in interest rates at the reporting
date would have increased/(decreased) equity and profit or loss before tax by the amounts
shown below. There is no impact on other components of equity. This analysis assumes
that all other variables, in particular foreign currency rates, remain constant.
Profit or loss before tax
100 bp
100 bp
increase
decrease
$
$
Group
30 June 2015
Variable rate instruments
(398,247)
398,247
30 June 2014
Variable rate instruments
(260,931)
260,931
Company
30 June 2015
Variable rate instruments
1,458
(1,458)
30 June 2014
Variable rate instruments
1,683
(1,683)
28 FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS (CONT’D)
Foreign currency risk
Foreign currency risk refers to the risk that the fair value of future cash flows of a financial
instrument will fluctuate because of changes in foreign exchange rates. The Group is
exposed to foreign currency risk on sales, purchases and borrowings, including inter-
company sales, purchases and inter-company balances that are denominated in a currency
other than the respective functional currencies of Group entities. The currencies in which
these transactions primarily are denominated are the Singapore dollar (SGD), US dollar
(USD) and Euro (EUR).
Interest on borrowings is denominated in the currency of the borrowing. Generally,
borrowings are denominated in currencies that match the cash flows generated by the
underlying operations of the Group, primarily SGD, but also USD and EUR. This provides
an economic hedge without derivatives being entered into and therefore hedge accounting
is not applied in these circumstances.
In respect of other monetary assets and liabilities denominated in foreign currencies, the
Group’s policy is to ensure that its net exposure is kept to an acceptable level by buying or
selling foreign currencies at spot rates when necessary to address short-term imbalances.
The Company has a number of investments in foreign subsidiaries whose net assets are
exposed to currency translation risk. The Group does not currently designate its foreign
currency denominated debt as a hedging instrument for the purpose of hedging the
translation of its foreign operations.
NOTES TO THE
FINANCIAL STATEMENTS
Year ended 30 June 2015
