Asus 2014 Annual Report Download - page 264

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Price risk
a. The Company is exposed to equity securities price risk because of investments held by
the Company and classified on the separate balance sheet either as available-for-sale or
at fair value through profit or loss. To manage its price risk arising from investments in
equity securities, the Company diversifies its portfolio. Diversification of the portfolio is
done in accordance with the limits set by the Company.
b. The prices of the Company’s investments in equity securities would change due to the
change of the future value of investee companies. If the prices of these equity securities
had increased by 1% with all other variables held constant, other comprehensive income
- unrealized gain on valuation of available-for-sale financial assets for the years ended
December 31, 2014 and 2013 would have increased by $544,761 and $346,337,
respectively. The Company is exposed to equity securities price risk because of
investments held by the Company classified as available-for-sale financial assets or
financial assets at fair value through profit or loss at the separate balance sheet. The
Company is not exposed to commodity price risk. To manage equity securities price risk,
the Company diversifies its investment portfolio in accordance with the limits set by the
Company.
Interest rate risk
The Company analyses its interest rate exposure on a dynamic basis. Various scenarios are
simulated taking into consideration refinancing, renewal of existing positions, alternative
financing and hedging. Based on these scenarios, the Company calculates the impact on
profit and loss of a defined interest rate shift. For each simulation, the same interest rate
shift is used for all currencies. The scenarios are run only for liabilities that represent the
major interest-bearing positions. The Company expects no significant interest rate risk
would arise.
Credit risk
a. Credit risk refers to the risk of financial loss to the Company arising from default by the
clients or counterparties of financial instruments on the contract obligations. The
maximum exposure to credit risk at end of the financial reporting period is the carrying
amount of all financial instruments. According to the Company’s credit policy, each
local entity in the Company is responsible for managing and analysing the credit risk for
each of their new clients before standard payment and delivery terms and conditions are
offered. Internal risk control assesses the credit quality of the customers, taking into
account their financial position, past experience and other factors. Individual risk limits
are set based on internal or external ratings in accordance with limits set by the board of
directors. The utilization of credit limits is regularly monitored. Credit risk arises from
cash and cash equivalents, derivative financial instruments and deposits with banks and
financial institutions, as well as credit exposures to wholesale, including outstanding
receivables and committed transactions. For banks and financial institutions, only those
with a rating of “A” class above as evaluated by an independent party are accepted as
counterparties.