Page 183 - Pakistan Oilfield Limited - Annual Report 2022

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Annual Report 2022

Financial assets include Rs 67,718,157 thousand (2021: Rs 47,569,655 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 403,060 thousand (2021: Rs 294,319 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 instruments traded in the market.
At the year end the Company is not exposed to price risk since there are no financial instruments,
whose fair value or future cash flows will fluctuate because of changes in market price.
34.3.2 Capital risk management

The Company’s objectives when managing capital are to ensure the Company’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 Company 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.

Consistent with others in the industry, the Company monitors capital on the basis of the gearing
ratio. The gearing ratio of the Company has always been low and the Company has mostly financed
its projects and business expansions through equity financing. Further, the Company is not subject
to externally imposed capital requirements.
34.3.3 Fair value of financial assets and liabilities

All financial assets and financial liabilities are initially recognized at fair value of the consideration
paid or received, net of transaction cost as appropriate. The carrying values of other financial assets
and financial liabilities of the Company not carried at fair value is a reasonable approximation of
their fair values.