Cathay Pacific 2009 Annual Report Download - page 94

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Notes to the Accounts SUPPLEMENTARY INFORMATION
31. Financial risk management (continued)
(ii) Interest rate risk
The Group’s cash flow exposure to interest rate risk arises primarily from long-term borrowings at floating
rates. Interest rate swaps are used to manage the interest rate profile of interest-bearing financial liabilities
on a currency by currency basis to maintain an appropriate fixed rate and floating rate ratio. Interest rate risk
is measured by using sensitivity analysis on variable rate instruments.
At the reporting date the interest rate profile of the interest-bearing financial instruments was as below:
Group Company
2009
HK$M
2008
HK$M
2009
HK$M
2008
HK$M
Fixed rate instruments
Liquid funds 1,164 812 1,164 812
Long-term loans (2,075) (2,020) (2,075) (2,020)
Obligations under finance leases (13,198) (12,696) (17,421) (17,805)
Interest rate and currency swaps (8,099) (643) (7,407) 147
Net exposure (22,208) (14,547) (25,739) (18,866)
Group Company
2009
HK$M
2008
HK$M
2009
HK$M
2008
HK$M
Variable rate instruments
Liquid funds 15,358 14,276 9,956 6,754
Long-term loans (17,224) (16,448) (12,767) (10,951)
Obligations under finance leases (10,145) (9,116) (9,998) (8,917)
Interest rate and currency swaps 8,683 1,116 8,067 413
Bank overdrafts (11) (6) (11) (6)
Net exposure (3,339) (10,178) (4,753) (12,707)
Sensitivity analysis for interest rate exposure
An increase of 25 basis points in interest rates at the reporting date would have decreased profit and loss
and increased other equity components for the year by the amounts shown below. These amounts represent
the fair value change of interest rate swaps and financial liabilities designated as at fair value through profit
and loss at the reporting date and the increase in net finance charges. This analysis assumes that all other
variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis
for 2008.
2009 2008
Profit
and loss
HK$M
Other equity
components
HK$M
Profit
and loss
HK$M
Other equity
components
HK$M
Variable rate instruments (85) 106 (97) (2)
92