✨ Financial Statements Notes
2562 NEW ZEALAND GAZETTE, No. 112 4 AUGUST 2009
Notes to the financial statements
18 Financial instruments (continued)
Capital management
The Group’s capital includes Core Real Capital Base Reserve, Accumulated Income Reserve and Capital Base Reserve.
The Group’s policy is to maintain a strong capital base so as to maintain investor confidence and to sustain future development of the Trust.
The Group is not subject to any externally imposed capital requirements.
The Group’s policies in respect of capital management and allocation are reviewed regularly by the Board of Trustees.
There have been no material changes in the Group’s management of capital during the period.
Sensitivity analysis
In managing interest rate and currency risks, the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings. Over the longer-term, however, permanent changes in foreign exchange and interest rates will have an impact on profit.
In New Zealand Dollars ($000’s)
At 31 March 2009, it is estimated that a general increase/(decrease) of one percentage point in interest rates would increase the Group’s profit before income tax by approximately $14,060,000 (2008: $4,500,000). Interest rate swaps have been included in this calculation.
This calculation has been performed by determining which of the Group’s financial assets are impacted by market interest rates, as opposed to those with fixed interest rates or variable interest rates where the interest rate risk is managed by way of interest rate swap derivatives. The fair value of the investments are then recalculated under a scenario where interest rates are one percentage point higher.
It is estimated that a general increase/(decrease) of 15 percentage point in the value of the New Zealand dollar against other foreign currencies would have decreased/(increased) the Group’s profit before income tax by approximately $10,909,000 for the year ended 31 March 2009. For the year ending 31 March 2008 a one percentage point increase/(decrease) in the value of the New Zealand dollar would have decreased/(increased) the Group’s profit before tax by $850,000. The forward exchange contracts have been included in this calculation.
This calculation is performed by firstly determining which financial assets are denominated in an overseas currency and where the exchange rate risk is not managed by way of foreign exchange contracts. A calculation is then performed to simulate the impact of a change in the value of the New Zealand dollar.
Estimation of fair value
The methods used in determining the fair values of financial instruments are discussed in note 4.
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NZ Gazette 2009, No 112
✨ LLM interpretation of page content
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Notes to the financial statements of The Canterbury Community Trust
(continued from previous page)
🏢 State Enterprises & Insurance6 July 2009
Trust Funds, Financial Instruments, Interest Rate Risk, Foreign Currency Risk, Interest Rate Swaps, Investment Management