Donaco International Limited / 2017 Annual Report Donaco International Limited / 2017 Annual Report 66 67 67 Donaco International Limited / 2017 Annual Report Donaco International Limited / 2017 Annual Report 66 Notes to the Financial Statements for the year ended 30 June 2017 Notes to the Financial Statements for the year ended 30 June 2017 A 5% strengthening of the Australian dollar against the various foreign currencies at the balance date would increase/ (decrease) the Company’s profit/(loss) after tax by the amounts shown below. The analysis assumes that all other variables remain constant. Australian dollar strengthened % Change Effect on profit after tax Effect on profit after tax 2017 2016 $ $ Consolidated USD 5% 3,095,992 4,614,606 VND 5% 218,537 531,568 CNY 5% (75,057) (83,341) MYR 5% 2,386 (3,166) THB 5% (67,988) (1,380,885) SGD 5% (9,525) (4,963) EUR 5% (334) – HKD 5% (6,427) (5,432) 3,157,583 3,668,386 Foreign currency risk The consolidated entity is exposed to foreign exchange fluctuations in relation to cash generated for working capital purposes, denominated in foreign currencies and net investments in foreign operations, in which the functional currencies are Vietnamese dong and Thai baht. Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. An assessment of the sensitivity of the consolidated entity’s exposure to interest rate movements was performed, and was found to be immaterial for the purposes of this disclosure. Exchange rate exposures are managed within approved policy parameters and material movements are not expected. The consolidated entity does not enter into any forward exchange contracts to buy or sell specified foreign currencies. The average exchange rates and reporting date exchange rates applied were as follows: Average exchange rate Reporting date exchange rate 2017 2016 2017 2016 Australian dollars USD 1.3254 1.3730 1.3001 1.3466 THB 0.0380 0.0387 0.0382 0.0382 VND 0.0001 0.0001 0.0001 0.0001 CNY 0.1946 0.2132 0.1921 0.2027 MYR 0.3093 0.3322 0.3028 0.3344 SGD 0.9520 0.9881 0.9436 0.9973 HKD 0.1707 0.1770 0.1666 0.1736 The carrying amount of the consolidated entity’s foreign currency denominated financial assets and financial liabilities at the reporting date were as follows: Assets Liabilities 2017 2016 2017 2016 Consolidated USD 39,885,279 49,687,955 (101,805,116) (141,980,071) VND 6,666,217 3,402,538 (11,036,948) (14,033,888) CNY 14,514,911 14,511,848 (13,013,771) (12,845,036) MYR 34,749 63,329 (82,477) – THB 26,675,967 27,617,696 (25,316,206) – SGD 203,720 199,763 (13,219) (100,494) EUR 6,685 – – – HKD 183,740 164,218 (55,193) (55,576) 88,171,269 95,647,346 (151,322,930) (169,015,064) 2017 2016 Weighted average interest rate Balance Weighted average interest rate Balance % $ % $ Consolidated Bank loans 8.09% (108,462,225) 8.12% (151,801,133) Cash on hand and cash at bank 0.00% 64,338,919 0.05% 78,213,081 Short-term deposits 0.00% 1,683,830 0.00% 7,938 Net exposure to cash flow interest rate risk (42,439,476) (73,580,114) An analysis by remaining contractual maturities is shown in ‘liquidity and interest rate risk management’ below. An assessment of the sensitivity of the consolidated entity’s exposure to interest rate movements was performed, and was found to be immaterial for the purposes of this disclosure. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The consolidated entity obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the Statement of Financial Position and notes to the financial statements. The consolidated entity does not hold any collateral. A 5% weakening of the Australian dollar against the various currencies would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. Interest rate risk The consolidated entity’s exposure to the risk of changes in market interest rates relates primarily to the consolidated entity’s bank loans and debt obligations and its cash and cash equivalents. The consolidated entity manages its interest rate risk by using a combination of variable and fixed rate borrowings. As at the reporting date, the consolidated entity had the following cash and cash equivalents: