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AL MAZAYA HOLDING COMPANY K.S.c. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2011
MAZAY
f,
AIM
ro
tt)\D
28.
FINANCIAL INSTRUMENTS (CONTINUED)
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.
2011
2010
2009
Impact on consolidated statement of income
KD
KD
± 539,718
KD
±554,71
I
KD
±585,439
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:
Market
indices
2011
2010
Change
Change
in
Effect
on Effect
on
in
Effect
on
Effect
on
equity
consolidated
consolidated
equity
consolidated
consolidated
price
statement of
statement
of
price
statement of
statement
of
income
comprehensive
income
comprehensive
%
(KD)
income (KD)
%
(KD)
income (KD)
Kuwait
Stock
Exchange
±5%
± 522,843
±5%
± 699,360
Credit risk management
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in fmancial
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.
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