Page 72 - Annual Report 2013
P. 72
Financial Statements
3.1.1 Exchange rate risk
Exchange rate risk occurs if future business transactions, recognized assets and liabilities and net
investments in activities outside the euro zone are expressed in a currency other than the functional
currency of the Company (euro).
The Company’s exposure to foreign exchange risk is very limited since its business is substantially
transacted in its functional currency.
3.1.2 Cash flow and fair value interest rate risk
The cash flow interest rate risk is the risk of fluctuations in the future cash flows of a financial instrument
as a result of fluctuations in the market interest rate.
The Company has interest-bearing assets in the form of cash and cash equivalent (short term time
deposits and other highly liquid investments), thus profits and cash flows from investment activities
are dependent in market interest rates. During 2013 the Company’s cash and cash equivalent (short
term time deposits and other liquid investments) earned an effective interest rate (referring to yield
from time deposits and current accounts) amounting to 0,40% (2012: 2,65%). The impact from possible
future interest rates on the Company’s financial performance, regarding cash and cash equivalents, is
presented below:
2013 2012
Interest rates fluctuation +1% -0.4% +1% -1%
Impact on interest receipts 354,889 (141,956) 137,256 (137,256)
The Company is also exposed to interest rate risk arising from its long-term borrowings. Borrowings
issued at variable interest rates expose the Company to cash flow interest rate risk while borrowings
issued at fixed interest rates expose the Company to fair value interest rate risk.
The Company’s borrowings are borrowings with fixed interest rates. Hence the financial performance
cannot be affected by fluctuations in interest rates with respect to such loans. The fair value interest
rate risk of such loans is presented in note 5.20 “Bank loans”.
The fair value interest rate risk is the risk of fluctuations in the value of a financial instrument as a result
of fluctuations in the market interest rate. The Company is exposed to fair value interest rate risk as a
result of discounting liabilities and receivables of long term settlement. Such liabilities and receivables
are discounted using the prevailing pre-tax risk free rate which is affected by interest rates fluctuations.
The impact from possible future interest rates on the Company’s financial performance from liabilities
of long term settlement is presented below:
2013 2012
Interest rates fluctuation +1% -1% +1% -1%
Grant of rights fee payable 196,725 (227,945) 122,189 (160,237)
Provision for major restoration expenses 134,945 (134,927) 85,306 (67,626)
Total impact on interest expenses 331,670 (362,872) 207,495 (227,863)
3.1.3 Price risk
Price risk is the risk of fluctuations in the value of assets and liabilities as a result of changes in market pric-
es. The Company’s exposure to equity securities price risk is limited to the investment in an unlisted entity
which represents less than 1% of total asset. The Company is not exposed to commodity price risk.
3.1.4 Credit risk
Credit risk arises from cash and cash equivalents held with banks, short term and long term held-to-
maturity financial assets and credit exposures from customers.
31 of 58 Financial Statements as at 31 December 2013 (Amounts in Euros unless otherwise stated).
3.1.1 Exchange rate risk
Exchange rate risk occurs if future business transactions, recognized assets and liabilities and net
investments in activities outside the euro zone are expressed in a currency other than the functional
currency of the Company (euro).
The Company’s exposure to foreign exchange risk is very limited since its business is substantially
transacted in its functional currency.
3.1.2 Cash flow and fair value interest rate risk
The cash flow interest rate risk is the risk of fluctuations in the future cash flows of a financial instrument
as a result of fluctuations in the market interest rate.
The Company has interest-bearing assets in the form of cash and cash equivalent (short term time
deposits and other highly liquid investments), thus profits and cash flows from investment activities
are dependent in market interest rates. During 2013 the Company’s cash and cash equivalent (short
term time deposits and other liquid investments) earned an effective interest rate (referring to yield
from time deposits and current accounts) amounting to 0,40% (2012: 2,65%). The impact from possible
future interest rates on the Company’s financial performance, regarding cash and cash equivalents, is
presented below:
2013 2012
Interest rates fluctuation +1% -0.4% +1% -1%
Impact on interest receipts 354,889 (141,956) 137,256 (137,256)
The Company is also exposed to interest rate risk arising from its long-term borrowings. Borrowings
issued at variable interest rates expose the Company to cash flow interest rate risk while borrowings
issued at fixed interest rates expose the Company to fair value interest rate risk.
The Company’s borrowings are borrowings with fixed interest rates. Hence the financial performance
cannot be affected by fluctuations in interest rates with respect to such loans. The fair value interest
rate risk of such loans is presented in note 5.20 “Bank loans”.
The fair value interest rate risk is the risk of fluctuations in the value of a financial instrument as a result
of fluctuations in the market interest rate. The Company is exposed to fair value interest rate risk as a
result of discounting liabilities and receivables of long term settlement. Such liabilities and receivables
are discounted using the prevailing pre-tax risk free rate which is affected by interest rates fluctuations.
The impact from possible future interest rates on the Company’s financial performance from liabilities
of long term settlement is presented below:
2013 2012
Interest rates fluctuation +1% -1% +1% -1%
Grant of rights fee payable 196,725 (227,945) 122,189 (160,237)
Provision for major restoration expenses 134,945 (134,927) 85,306 (67,626)
Total impact on interest expenses 331,670 (362,872) 207,495 (227,863)
3.1.3 Price risk
Price risk is the risk of fluctuations in the value of assets and liabilities as a result of changes in market pric-
es. The Company’s exposure to equity securities price risk is limited to the investment in an unlisted entity
which represents less than 1% of total asset. The Company is not exposed to commodity price risk.
3.1.4 Credit risk
Credit risk arises from cash and cash equivalents held with banks, short term and long term held-to-
maturity financial assets and credit exposures from customers.
31 of 58 Financial Statements as at 31 December 2013 (Amounts in Euros unless otherwise stated).
