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Singapore Airlines Annual Report 2007-08
157
38 Financial Instruments (in $ million) (continued)
(d) Market risk sensitivity analysis (continued)
Interest rate risk
The interest rate sensitivity analysis is based on the following assumptions:
•฀ Changes฀in฀market฀interest฀rates฀affect฀the฀interest฀income฀or฀nance฀charges฀of฀variable฀interest฀nancial฀
instruments.
•฀ Changes฀in฀market฀interest฀rates฀affect฀the฀fair฀value฀of฀derivative฀nancial฀instruments฀designated฀as฀hedging฀
instruments and all interest rate hedges are expected to be highly effective.
•฀ Changes฀in฀the฀fair฀values฀of฀derivative฀nancial฀instruments฀and฀other฀nancial฀assets฀and฀liabilities฀are฀estimated฀
by discounting the future cash flows to net present values using appropriate market rates prevailing at the balance
sheet date.
Under these assumptions, an increase or decrease in market interest rates of one basis point for all currencies in which
the Group has borrowings and derivative financial instruments at 31 March 2008 will have the following effects:
The Group The Company
31 March 31 March
2008 2007 2008 2007
Effect of an increase in one basis point in
market interest rates
Increase in profit before taxation 0.5 0.5 0.3 0.3
Increase in equity * * * *
Effect of a decrease in one basis point in
market interest rates
Decrease in profit before taxation (0.5) (0.5) (0.3) (0.3)
Decrease in equity * * * *
* Amount less than $0.1 million.
Market price risk
If prices for available-for-sale investments increase or decrease by 1% with all other variables being held constant, the
before tax effects on equity are as follows:
The Group The Company
31 March 31 March
2008 2007 2008 2007
Effect of an increase in 1% of quoted prices
Increase in equity 4.6 6.0 3.6 4.7
Effect of a decrease in 1% of quoted prices
Decrease in equity (4.6) (6.0) (3.6) (4.7)
Other price risks
As at 31 March 2008, hypothetical changes in other risk variables will not significantly affect the price of financial
instruments at that date.
NOTES TO THE FINANCIAL STATEMENTS
31 March 2008