FGV Annual Report 2018

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 181 01 02 05 03 07 06 04 08 09 ANNUAL INTEGRATED REPORT 2018 EXAMINED OUR NUMBERS 4 FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Financial risk management policies (continued) Market risk (continued) (iii) Finance rate risk (continued) Group Company 2018 RM’000 2017 RM’000 2018 RM’000 2017 RM’000 Financial liabilities (continued) At floating rate (exposed to cash flow finance rate risk LLA liability 4,328,008 4,393,280 - - Loans due to subsidiaries - - 196,860 381,740 Islamic term loans 1,204,614 814,404 - - Term loans 584 1,028 - - 5,533,206 5,208,712 196,860 381,740 9,731,222 9,890,752 2,348,892 2,490,075 If discount rate on LLA liability increased/decreased by 50 basis points and finance rate on borrowings decreased/increased by 100 basis points with all other variables held constant, the profit after tax of the Group will increase by RM191,572,000 (2017: RM188,125,000) and decrease by RM122,222,000 (2017: RM119,421,000) 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. Credit risk arises from cash and cash equivalents, contractual cash flows of debt investments carried at amortised cost, at fair value through other comprehensive income (FVOCI) and at fair value through profit or loss (FVPL), favourable derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to from outstanding receivables. The Group adopts the policy of dealing with customers with an appropriate credit history, and obtaining sufficient security where appropriate, including payments in advance, security in the form of guarantees, deeds of undertaking or letters of credit which can be called upon if the counterparty is in default under the terms of the agreement. Receivables, amounts due from a significant shareholder, subsidiaries an associate, joint ventures and other related companies exposure are closely monitored and continuously followed up. The Group’s and Company’s deposits, cash and bank balances were largely placed with major financial institutions in Malaysia. The Directors are of the view that the possibility of non-performance by these financial institutions, including those non-rated financial institutions, is remote on the basis of their financial strength.