Notes to The Consolidated Financial Statements
AL MAZAYA HOLDING K.S.C. (HOLDING) AND ITS SUBSIDIARIES
For the year ended 31 December 2011
47
Interest rate risk management
The Group is exposed to interest rate risk as it borrows funds at floating interest rates and places time deposits with local
banks. The risk is managed by the Group by borrowing funds at market linked floating interest rates and placing time
deposits at the best available rates.
The Group’s exposures to interest rates on time deposits and long-term debts are detailed in notes 5 and 13 to these
consolidated financial statements respectively.
Interest rate sensitivity analysis
The following table illustrates the sensitivity of the profit for the year to a reasonably possible change in interest rates of +
1% (2009: + 1%) with effect from the beginning of the year. These changes are considered to be reasonably possible based
on observation of current market conditions. The calculations are based on the Group’s financial instruments held at the
end of the reporting period. All other variables are held constant.
A positive number below indicates an increase in profit and a negative number indicates a decrease in profit.
Equity price risk
Equity price risk is the risk that fair values of equities decrease as the result of changes in level of equity indices and the
value of individual stocks. The equity price risk exposure arises from the Group's investment in equity securities classified
as investments available for sale.
The following table demonstrates the sensitivity to a reasonably possible change in equity indices as a result of change in
the fair value of these investments to which the Group had significant exposure:
Credit risk management
Credit risk refers to the risk that 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. The Group’s exposure and the
credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread
amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by
the management annually.
Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing
credit evaluation is performed on the financial condition of trade receivables.
2011
2010
-
-
Change in
equity price
%
Effect on
consolidated
statement of
income (KD)
Effect on
consolidated
statement of
comprehensive
income (KD)
Market indices
Kuwait Stock
Exchange
Change in
equity price
%
Effect on
consolidated
statement of
income (KD)
Effect on
consolidated
statement of
comprehensive
income (KD)
2011
KD
2010
KD
2009
KD
Impact on consolidated statement of income
KD
539,718
±
554,711
±
585,439
±
5%±
522,843
±
5%
±
699,360
±
