Page 248 - Pakistan Oilfield Limited - Annual Report 2022
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PAKISTAN OILFIELDS LIMITED
Notes to and Forming Part of the -
Consolidated Financial Statements
For the year ended June 30, 2022
(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 67,903,426 thousand (2021: Rs 47,721,425 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 404,687 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 financial instruments traded in the market.
At the year end the Group is not exposed to price risk since there are no financial instruments,
whose fair vale or future cash flows will fluctuate because of changes in market price.
37.3.2 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 the 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.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio.
The gearing ratio of the Group has always been low and the Group has mostly financed its projects
and business expansions through equity financing. Further, the Group is not subject to externally
imposed capital requirements.
37.3.3 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 Group not carried at fair value is a reasonable approximation of their
fair values.
38. STAFF RETIREMENT BENEFITS
The details of actuarial valuation of defined benefit funded plans carried out as at year end are as
follows:
