FGV Annual Report 2016

ANNUAL INTEGRATED REPORT 2016 205 FINANCIAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 4 FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Financial risk management policies (continued) Market risk (continued) (iii) Finance rate risk (continued) Group Company 2016 RM'000 2015 RM'000 2016 RM'000 2015 RM'000 Financial liabilities (continued) At floating rate (exposed to cash flow finance rate risk) LLA liability 4,407,564 4,627,195 - - Loans due to subsidiaries - - 272,110 312,500 Islamic short term trade financing 540,900 - 540,900 - Term loans 1,026 165,601 - - 4,949,490 4,792,796 813,010 312,500 9,987,701 10,070,904 2,530,910 2,726,419 If discount rate on LLA liability increased/decreased by 50 basis points and finance rate on borrowings increased/decreased by 10 basis points with all other variables held constant, the profit after tax of the Group will increase by RM179,983,000 (2015: RM207,551,000) and decrease by RM201,425,000 (2015: RM235,901,000) respectively. Other financial assets and financial liabilities are non-finance bearing, and therefore are not affected by changes in finance rates. Credit risk Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group adopts the policy of dealing with customers with an appropriate credit history, and obtaining sufficient security where appropriate, including payments in advance, to mitigate credit risk. The financial assets exposure can be illustrated as follows: