Page 232 - Pakistan Oilfields Limited - Annual Report 2021

NOTES TO AND FORMING

PART OF THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED JUNE 30, 2021

The Group is exposed to currency risk arising from currency exposure with respect to the US dollar.
Currently foreign exchange risk is restricted to trade debts, bank balances, receivable from/ payable
to joint operating partners, payable to suppliers and provision for decommissioning cost.

Financial assets include Rs 55,054,842 thousand (2020: Rs 48,920,065 thousand) and financial
liabilities include Rs 688,637 thousand (2020: Rs 1,330,689 thousand) which are subject to currency
risk.

If exchange rates had been 10% lower/higher with all other variables held constant, profit after tax
for the year would have been Rs 3,805,634 thousand lower/higher (2020: Rs 3,331,256 thousand
higher/lower).
(ii) Interest rate risk

Interest rate risk represents the risk that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in market interest rates.

The Group has no significant long term interest bearing financial assets and liabilities whose fair
value or future cash flows will fluctuate because of changes in market interest rates.

Financial assets include Rs 47,569,655 thousand (2020: Rs 43,046,489 thousand) which are subject
to interest rate risk. Applicable interest rates for financial assets have been indicated in respective
notes.

If interest rates had been 1% higher/ lower with all other variables held constant, profit after tax for
the year would have been Rs 294,319 thousand (2020: Rs 275,390 thousand) higher/ lower, mainly
as a result of higher/ lower interest income from these financial assets.
(iii) Price risk

Price risk represents the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices (other than those arising from interest rate risk or
currency risk), whether those changes are caused by factors specific to the individual financial
instrument or its issuer, or factors affecting all similar financial instruments traded in the market.

The Group is exposed to equity securities price risk because of investments held by the Group and
classified on the consolidated statement of financial position as available for sale. To manage its price
risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of
the portfolio is done in accordance with the investment policy of the Group.

Investments classified as fair value through profit or loss of Rs Nil (2020: Rs 6,519 thousand) were
subject to price risk.
38.3.2 Capital risk management

The Group’s objectives when managing capital are to ensure the Group’s ability not only to continue
as a going concern but also to meet its requirements for expansion and enhancement of its business,
maximize return of shareholders and optimize benefits for other stakeholders to maintain an optimal
capital structure and to reduce the cost of capital.

In order to achieve the above objectives, the Group may adjust the amount of dividends paid to
shareholders, issue new shares through bonus or right issue or sell assets to reduce debts or raise
debts, if required.

230 PAKISTAN OILFIELDS LIMITED