Maxis Berhad
Annual Report 2015
page
154
Notes to the Financial Statements
31 December 2015
32 RESERVES (CONTINUED)
(c) Other reserves (continued)
The share-based payments reserve comprises:
(a) discount on shares issued to retail investors in relation to the Listing;
(b) fair value of share options and shares grants less any shares issued under the ESOS and LTIP respectively; and
(c) fair value of shares less any shares acquired under the incentive arrangement.
The cash flow hedging reserve represents the deferred fair value gains/(losses) relating to derivative financial instruments used to hedge
certain borrowings and forecast transactions of the Group and of the Company.
The currency translation differences reserve comprises all foreign exchange differences arising from the translation of the financial
statements of foreign entities.
33 FINANCIAL RISK MANAGEMENT
The Group’s and the Company’s activities expose them to a variety of financial risks, including market risk (interest rate risk and foreign exchange
risk), credit risk, liquidity risk and capital risk. The Group’s and the Company’s overall risk management programme focuses on the unpredictability
of financial markets and seeks to minimise potential adverse effects on the Group’s and the Company’s financial performances. The Group and the
Company use derivative financial instruments to hedge designated risk exposures of the underlying hedge items and do not enter into derivative
financial instruments for speculative purposes.
The Group and the Company have established financial risk management policies and procedures/mandates which provide written principles for
overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk and use
of derivative financial instruments.
(a) Market risk
Market risk is the risk that the fair value or future cash flow of the financial instruments that will fluctuate because of changes in market
prices. The various components of market risk that the Group and the Company are exposed to are discussed below.
(i)
Foreign exchange risk
The objectives of the Group’s and of the Company’s currency risk management policies are to allow the Group and the Company to
effectively manage the foreign exchange fluctuation against its functional currency that may arise from future commercial transactions
and recognised assets and liabilities. Forward foreign exchange contracts are used to manage foreign exchange exposures arising
from all known material foreign currency denominated commitments as and when they arise and to hedge the movements in exchange
rates by establishing the rate at which a foreign currency monetary item will be settled. Gains and losses on foreign currency forward
contracts entered into as hedges of foreign currency monetary items are recognised in the financial statements when the exchange
differences of the hedged monetary items are recognised in the financial statements. Cross currency interest rate swap contracts are
also used to hedge the volatility in the cash flow attributable to variability in the foreign currency denominated borrowings from the
inception to maturity of the borrowings.
The currency exposure of financial assets and financial liabilities of the Group and of the Company that are not denominated in the
functional currency of the respective companies are set out below. Currency risks in respect of intragroup receivables and payables
have been included in the Group’s currency exposure table as this exposure is not eliminated at the Group level.
