Investor Presentaiton
HKAS 1.51(a)
HKAS 1.49
HK Listco Ltd
HKFRS 7.31-35
Financial statements for the year ended 31 December 2023
& 40-42
(c)
Interest rate risk 266, 267
HKFRS 7.22A
(i)
HKFRS7.22B(a) &
24A
HKFRS 7.23A & 23B
HKFRS 7.22B & 23D
HKFRS 7.21A, 21B & 21D
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. The group's interest rate risk arises primarily
from long-term borrowings. Borrowings issued at variable rates and fixed rates expose the group to
cash flow interest rate risk and fair value interest rate risk respectively. The group has a policy of
ensuring that between [•] % and [•] % of its borrowings are effectively on a fixed rate basis, either
through the contractual terms of the interest-bearing financial liabilities or through the use of interest
rate swaps.
The group's interest rate risk profile as monitored by management is set out in (ii) below.
Hedges of interest rate risk 275
Interest rate swaps, denominated in Hong Kong dollars, have been entered into to achieve an
appropriate mix of fixed and floating rate exposure consistent with the group's policy.
The following table provides information on the interest rate swaps which have been designated as
cash flow hedges of the interest rate risk inherent in the group's variable rate bank borrowings at the
end of the reporting period:
Notional amount
Carrying amount (note)
-Asset
- Liability
Note:
2023
2022
$'000
$'000
40,000
40,000
1,664
(128)
1,489
(52)
Interest rate swap assets and liabilities are included in the "Derivative financial instruments" (note 18).
The swaps mature over the next [•] years matching the maturity of the related loans (see note 33(b))
and have fixed swap rates ranging from [•] % to [•]% (2022: []% to [•] %).
The group seeks to hedge the benchmark interest rate component only and applies a hedge ratio of
1:1. The existence of an economic relationship between the interest rate swaps and the variable rate
borrowings is determined by matching their critical contract terms, including the reference interest
rates, tenors, interest repricing dates, maturity dates, interest payment and/or receipt dates, the
notional amounts of the swaps and the outstanding principal amounts of the loans. The main source of
hedge ineffectiveness in these hedging relationships is the effect of the counterparty and the group's
own credit risk on the fair value of the swaps which is not reflected in the fair value of the hedged cash
flows attributable to the change in interest rates.
275 HKFRS 7 includes additional information to be disclosed when hedge accounting is applied. The disclosure requirements apply
irrespective of whether HKAS 39 or HKFRS 9 hedge accounting is used (at the initial application of HKFRS 9, an entity had a
choice to continue to apply the hedge accounting requirements under HKAS 39).
The objective of the hedge accounting disclosures is that entities shall disclose information about:
• the risk management strategy and how it is applied to manage risks (paragraphs 22A to 22C);
•
how risk management activities may affect the amount, timing and uncertainty of future cash flows (paragraphs 23A to
23F); and
.
the effect of hedge accounting has had on the statement of financial position, the statement of comprehensive income
and the statement of changes in equity (paragraphs 24A to 24G).
Entities do not need to duplicate information that is already presented elsewhere, provided that the information is
incorporated by cross-reference from the financial statements to other statements where the information is disclosed, and
those statements are available to the financial statement users on the same terms as the financial statements and at the same
time.
In applying this objective, entities need to consider the necessary level of detail, the balance between different disclosure
requirements, the appropriate level of disaggregation and whether additional explanations are necessary to meet the objective.
176
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