Notes to The Consolidated Financial Statement
AL MAZAYA HOLDING COMPANY K.S.C.P. AND ITS SUBSIDIARIES
31 December 2013
30.3.2 Equity price risk
Equity price risk arises from changes in the fair values of equity investments. The Group manages this through diversification
of investments in terms of geographical distribution and industry concentration. The majority of the Group’s quoted
investments are quoted on the regional Stock Exchanges.
The effect on other comprehensive income (OCI) as a result of a change in the fair value of equity instruments held as
available for sale financial assets at 31 December 2013 due to 5% increase in the following market indices with all other
variables held constant is as follows:
The effect on the profit before directors’ remuneration and taxation represents increase in fair value of impaired available
for sale investments which will be recorded in the consolidated income statement.
50 basis points increase
Increase (decrease) in profit
2013
KD
2012
KD
Kuwaiti Dinars
246,938
247,359
30.3 Market risk
Market risk is the risk that the value of an asset will fluctuate as a result of changes in market variables such as interest
rates, foreign exchange rates and equity prices, whether those changes are caused by factors specific to the individual
investment or its issuer or factors affecting all investments traded in the market.
Market risk is managed on the basis of pre-determined asset allocations across various asset categories, diversification of
assets in terms of geographical distribution and industry concentration, a continuous appraisal of market conditions and
trends and management’s estimate of long and short term changes in fair value.
30.3.1 Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect future profitability or the fair values
of financial instruments. Interest rate risk is managed by the finance department of the Parent Company. The Group is
exposed to interest rate risk on its interest bearing assets and liabilities (bank deposits, loans and borrowings and bonds)
as a result of mismatches of interest rate repricing of assets and liabilities. It is the Group's policy to manage its interest
cost using a mix of fixed and variable rate debts. The Group's policy is to keep a substantial portion of its borrowings at
variable rates of interest.
The sensitivity of the consolidated statement of income is the effect of the assumed changes in interest rates on the
Group’s profit before directors’ remuneration and taxation, based on floating rate financial assets and financial liabilities
held at 31 December 2013. There is no impact on equity.
The following table demonstrates the sensitivity of the consolidated statement of income to a reasonable charge in
interest rates of 50 basis points, with all other variables held constant.
57
Effect on OCI
2013
KD
2012
KD
KSE ( 5%)
Others
11,177
80
136,381
80
±
Market indices
77
