NOTES TO
FINANCIAL STATEMENTS
71
GDS Global Limited Annual Report 2015
As at 30 September 2015
4
FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL MANAGEMENT (cont’d)
(c)
Financial risk management policies and objectives (cont’d)
(ii)
Interest rate risk management
Interest rate risk is the risk that the fair value or future cash flows of the Group’s
financial instruments will fluctuate because of changes in market interest rates. The
Group’s exposure to interest rate risk arises primarily from its loans and borrowings.
The Group’s policy is to manage interest costs using a mix of fixed and floating rate
debts. Summary quantitative data of the Group’s interest-bearing financial instruments
can be found in Section (iv) of this Note.
Interest rate sensitivity
The sensitivity analyses below have been determined based on the exposure to
interest rates at the end of the reporting period and the stipulated change taking
place at the beginning of the financial year and held constant throughout the reporting
period. A 50 basis point increase or decrease is used as this represents management’s
assessment of the reasonably possible change in interest rates.
If interest rates had been 50 basis points higher or lower and all other variables
are held constant, the Group’s profit for the year ended 30 September 2015 would
decrease/increase by $3,241 (2014: $Nil).
(iii) Credit risk management
Credit risk refers to the risk that a 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 and obtaining sufficient collateral
where appropriate, as a means of mitigating the risk of financial loss from defaults.
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 the counterparty limits that
are reviewed and approved by management periodically.
Concentration of credit risk exists when changes in economic, industry or geographic
factors similarly affect the Group’s counterparties whose aggregate credit exposure is
significant in relation to the Group’s total credit exposure. There is no concentration of
credit risk as the Group does not have any significant credit risk exposure to any single
counterparty or any group of counterparties having similar characteristics. The Group
defines counterparties as having similar characteristics if they are related entities.
The carrying amount of financial assets recorded in the financial statements, grossed
up for any allowances for losses, represents the Group’s maximum exposure to credit
risk.
Further details of credit risk on trade and other receivables are disclosed in Note 7 to
the financial statements.
