| 15. | FINANCIAL INSTRUMENTS |
The company’s financial instruments consist mainly of deposits with banks, short-term investments, accounts receivable and payable, bank borrowings, money and capital market borrowings, loans to and from subsidiaries. |
| Notes | 2018 Rm |
2017 Rm |
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|---|---|---|---|---|---|---|---|---|
| 15.1 | Summary of financial assets | |||||||
| Carrying value: | ||||||||
| Loans and receivables | 14 042 | 14 364 | ||||||
| Fair value: | ||||||||
| Loans and receivables | 14 042 | 14 364 | ||||||
| Summary financial liabilities | ||||||||
| Carrying value: | ||||||||
| Financial liabilities measured at amortised cost | 3 | 16 | ||||||
| Interest-bearing loans | 12,13 | 6 215 | 6 205 | |||||
| Amounts due to subsidiaries | 8 | 168 | 165 | |||||
| Fair value: | ||||||||
| Financial liabilities measured at fair value | 3 | 16 | ||||||
| Interest-bearing loans | 12,13 | 6 247 | 6 267 | |||||
| Amounts due to subsidiaries | 8 | 168 | 165 |
All financial instruments are carried at fair value or amounts that approximate fair value except for the non-current portion of fixed rate receivables, payables and interest-bearing borrowings which are carried at amortised cost. The carrying amounts for investments, cash, cash equivalents as well as the current portion of receivables, payables and interest-bearing borrowings approximate fair value due to the short-term nature of these instruments. All financial assets and liabilities are categorised as loans and receivables. |
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| 15.2 | Financial risk management | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
a. Capital risk management The company manages its capital to ensure that the company will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of debt and equity. The overall strategy remains unchanged from the previous year. The capital structure of the company consists of debt (refer notes 12 and 13) and equity attributable to equity holders of Barloworld Limited, comprising issued capital (note 12), reserves and retained earnings (statement of changes in equity). A finance committee consisting of senior executives of the company meets on a regular basis to review the capital structure based on the cost of capital and the risks associated with each class of capital, analyse currency and interest rate exposure and to re-evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. b. Market risk (i) Currency risk The company is not exposed to any significant currency risk. (ii) Interest rate risk The company manages the exposure to interest rate risk by maintaining a balance between fixed and floating rate borrowings. The interest rate characteristics of new borrowings and the refinancing of existing borrowings are structured according to expected movements in interest rates. There has been no change in the current year to this approach.
Interest rate sensitivity analysis Refer to note 31 of the consolidated annual financial statements. There has been no change during the current year in the company’s approach to managing other price risk. c. Credit risk The potential area of credit risk is short-term cash investments, equity loans and inter-group loans. It is company policy to deposit short-term cash investments with major banks and financial institutions with strong credit ratings.
d. Liquidity risk The company manages liquidity risk by monitoring forecast cash flows and maintaining a balance between long and short-term borrowings. There has been no change to this approach in the current year. Maturity profile of financial liabilities The maturity profile of the financial instruments is summarised as follows (based on contractual undiscounted cash flows):
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