notes to the financial statements
for the financial year ended 31 December 2014 (Continued)
12 DERIVATIVE FINANCIAL ASSETS/(LIABILITIES) (CONTINUED)
Non-hedging derivatives
The Group uses forward currency contracts and interest rate cap derivatives to manage some of the transaction exposures and limit its exposure to adverse fluctuation
in foreign currency and interest rates respectively. These contracts are not designated as cash flow or fair value hedges.
Interest rate caps
The Group has entered into the following interest rate caps to limit its exposure from adverse fluctuations in interest rates of its borrowings.
Notional amount
Strike rate (per annum)
Maturity date
Fair value
USD’000
RM’000
2014
35,000
1.28%
16 December 2015
1
2013
40,000
1.50%
29 December 2014
1
40,000
0.94%
16 December 2014
3
35,000
1.28%
16 December 2015
28
32
The Group will receive interest at the end of each contractual period if the USD London Interbank Offered Rate (“LIBOR”) exceeds the respective agreed strike rates. The
floating interest rates will be repriced quarterly.
Forward currency contracts
The Group enters into foreign currency forward contracts to protect the Group and the Company from movements in exchange rates by establishing the rate at which
a foreign currency asset or liability will be settled. Forward currency contracts are mainly used to hedge certain trade receivables denominated in United States Dollar
and payables denominated in Singapore Dollar for which firm commitments existed at the reporting date, extending to December 2015 (2013: November 2014).
Gains or losses arising from fair value changes of its financial liabilities
During the financial year, the Group recognised a loss of RM3,155,000 (2013: RM1,341,000) respectively in the profit or loss arising from fair value changes of its
derivative financial assets and liabilities. The method and assumptions applied in determining the fair value of derivatives are disclosed in Note 52.
116
Wah Seong Corporation Berhad • Annual Report 2014
