Annual Report - QuamIR

Notes to the Consolidated Financial Statements (Continued)
3 Financial risk management
3.1 Financial risk factors
The Group’s activities expose it to a variety of financial
risks: market risk (including foreign exchange risk, price risk,
commodity price risk and interest rate risk), credit risk and
liquidity risk. The Group’s major financial instruments include
trade and other receivables, cash and bank balances, derivative
financial instrument, financial assets at fair value through profit or
loss, available-for-sale financial assets, trade and other payables
and bank loans. Details of these financial instruments are
disclosed in the respective notes.
It is the policy of the Group not to enter into derivative
transactions for speculative purposes. The derivatives held are
not for speculative purpose and cannot be traded in the market.
They are part of an embedded investment rights to investment
assets and are not exposed to market risk (including commodity
price risk) since the gains and losses on the derivatives are offset
by the losses and gains on the underlying assets.
The Group’s Board of Directors focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects
on the Group’s financial performance. The Board of Directors
reviews and agrees policies for managing each of these risks and
they are summarised below.
3
3.1
(a)
Market risk
(i) Foreign exchange risk
The Group operates mainly in Hong Kong and
the Mainland China. Entities within the Group are
exposed to foreign exchange risk arising from future
commercial transactions and monetary assets and
liabilities that are denominated in a currency that is
not the entity’s functional currency.
(a)
(i)
The Group currently does not have any foreign
currency hedging activities. However, the
management of the Group monitors the foreign
exchange exposure closely and will consider
hedging significant foreign currency exposure should
the need arise.
If Renminbi had strengthened/weakened by 5%
against the Hong Kong dollars as at 31 December
2011 with all other variables held constant, the
Group’s profit before income tax would have been
HK$45.9 million lower/higher (2010: the Group’s loss
before income tax would have been HK$23.0 million
higher/lower).
5%
45,900,000
23,000,000
•
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