inter roller fa final

Notes to the Financial Statements28 Financial risk management (Cont’d)28.1 Objective and significant terms and conditionsIn order to manage the risks arising from fluctuations in currency exchange rates and interest rates, the Groupand the Company make use of the following derivative financial instruments.Forward foreign exchange contractsForward foreign exchange contracts are entered into to manage exposure to fluctuations in foreign currencyexchange rates on specific transactions.The Group and the Company operate and sell its products and services in several countries other than Singaporeand transacted in foreign currencies. As a result, the Group is exposed to movements in foreign currencyexchange rates arising from normal trading transactions, primarily with respect to United States Dollars andJapanese Yen. Forward foreign exchange contracts are entered into to manage the exposure to movements inforeign currency exchange rates on specific transactions. The risk management policy is to substantially enterinto forward foreign exchange contracts for receipts anticipated.At 31 December 2004 the settlement dates on open forward foreign exchange contracts ranged from 1 monthto 6 months (2003 - 3 months to 2 years).The Singapore dollar amounts to be received on the contractual exchange rates of outstanding contracts andtheir corresponding favourable and unfavourable fair values at the balance sheet date were:Sell contractsFavourable UnfavourableNotional fair value fair valueprincipal adjustment adjustment2004 2004 2004$ $ $Japanese Yen (at rates averagingYen 100 = S$1.5661) 23,457,661 - (352,796)United States Dollars (at ratesaveraging US$1 = S$1.67) 28,251,012 709,729 -51,708,673 709,729 (352,796)The fair values of forward foreign exchange contracts have been calculated using the rates quoted by Pacific FXDatabase at the balance sheet date.70 inter-roller engineering limited annual report2004