Annual Report 2020

NOTESTOTHE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2020 131 The United Laboratories International Holdings Limited Annual Report 2020 39. FINANCIAL INSTRUMENTS (Continued) Financial risk management objectives and policies (Continued) Market risk (Continued) Fair value and cash flow interest rate risks The Group has significant borrowings which bear interest rate risk. Floating rate borrowings, bank deposits and bank balances expose the Group to cash flow interest rate risk. Borrowings, leases liabilities and convertible bonds issued at fixed rates expose the Group to fair value interest rate risk. During the current year, the Group has not hedged its cash flow and fair value interest rate risk. Interest rate sensitivity analysis No sensitivity analysis was prepared for pledged bank deposits and bank balances as the financial impact arising on changes in interest rates was minimal due to limited changes in interest rate. The sensitivity analysis below has been determined based on the exposure to interest rates for the floating rate borrowings at the end of the reporting period. The analysis is prepared assuming the financial instruments outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point increase or decrease is used which represents management’s assessment of the reasonably possible change in interest rates. At the end of the reporting period, if interest rates of HIBOR, LIBOR and LPR had been increased/ decreased by 50 basis points and all other input variables remained constant, the Group’s post-tax profit for the year ended 31 December 2020 would decrease/increase by RMB8,428,000 (2019: RMB7,965,000). The Group monitors interest rate exposure and will consider hedging significant interest rate exposure should the need arise.