CITY DEVELOPMENTS LIMITED ANNUAL REPORT 2021 FINANCIALS 226 227 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2021 YEAR ENDED 31 DECEMBER 2021 41 FINANCIAL INSTRUMENTS (CONT’D) (ii) Liquidity risk (cont’d) Carrying amount Contractual cash flows Within 1 year After 1 year but within 5 years After 5 years $’000 $’000 $’000 $’000 $’000 Company 31 December 2020 Non-derivative financial liabilities Interest-bearing borrowings 7,452,594 (7,748,327) (1,749,664) (5,644,066) (354,597) Lease liabilities 20,002 (20,928) (6,321) (14,607) – Trade and other payables* 2,721,778 (2,721,778) (2,721,778) – – Other liabilities* 7,445 (7,445) – (7,216) (229) 10,201,819 (10,498,478) (4,477,763) (5,665,889) (354,826) Derivative financial instruments Derivative liabilities Cross-currency swaps (gross-settled): 5,302 - Outflow (392,108) (297,729) (94,379) – - Inflow 386,102 290,645 95,457 – Forward exchange contracts (gross-settled): 6,206 - Outflow (586,721) (586,721) – – - Inflow 577,180 577,180 – – Interest rate swaps (net-settled) 448 (395) (395) – – 11,956 (15,942) (17,020) 1,078 – Derivative assets Cross-currency swaps (gross-settled): (451) - Outflow (50,656) (1,003) (49,653) – - Inflow 51,121 71 51,050 – Forward exchange contracts (gross-settled): (8,121) - Outflow (737,302) (737,302) – – - Inflow 742,508 742,508 – – (8,572) 5,671 4,274 1,397 – 3,384 (10,271) (12,746) 2,475 – 10,205,203 (10,508,749) (4,490,509) (5,663,414) (354,826) * Excluding derivatives (shown separately) and deferred income 41 FINANCIAL INSTRUMENTS (CONT’D) (ii) Liquidity risk (cont’d) The maturity analyses show the contractual undiscounted cash flows of the Group and the Company’s financial liabilities on the basis of their earliest possible contractual maturity. The cash inflows/(outflows) disclosed represent the contractual undiscounted cash flows relating to derivative financial liabilities held for risk management purposes and which are usually not closed out prior to contractual maturity. The disclosure shows net cash flow amounts for derivatives that are net cash-settled and gross cash inflow and outflow amounts for derivatives that have simultaneous gross cash settlement e.g. forward exchange contracts. Net-settled derivative financial assets are included in the maturity analyses as they are held to hedge the cash flow variability of the Group’s floating rate loans. The interest payments on variable interest rate loans and bonds and notes in the table above reflect market forward interest rates at the period end and these amounts may change as market interest rates changes. It is not expected that the cash flows in the maturity analysis could occur significantly earlier, or at significantly different amounts. (iii) Market risk Market risk is the risk that changes in market prices such as interest rates, foreign exchange rates and equity prices, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposure within acceptable parameters, while optimising the return on risk. Interest rate risk The Group’s exposure to interest rate risk relates primarily to its interest-bearing financial assets and debt obligations. The Group adopts a policy of managing its interest rate exposure by maintaining a debt portfolio with both fixed and floating interest rates. Derivative financial instruments are used to manage interest rate risk, to the extent that the perceived cost of variable rate borrowings is considered to outweigh the benefits of their flexibility, and the Group actively monitors the need and timing for such derivatives. The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on the reference interest rates, tenors, repricing dates and maturities and the notional or par amounts. If a hedging relationship is directly affected by uncertainty arising from interest rate benchmark reform, then the Group assumes for this purpose that the benchmark interest rate is not altered as a result of interest rate benchmark reform. Hedging relationships that are impacted by interest rate benchmark reform may experience ineffectiveness because of the uncertainty about when and how replacement may occur for the relevant hedged item and hedging instrument due to the interest rate benchmark reform transition. For further details, see ‘Managing interest rate benchmark reform and associated risks’ below.
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