SEO Version
SEE HUP SENG LIMITED
Annual Report 2012
91
Notes to the Financial Statements
31 DECEMBER 2012
36
Financial Instruments (Continued)
(a)
Financial Risk Management Objectives and Policies (Continued)
(iv)
Foreign currency risk
The Group operates internationally and is exposed to various currencies, mainly to US Dollars.
The Group uses forward foreign exchange contracts to hedge a portion of its future foreign
exchange exposures. Such contracts provide for the Group to sell United States dollar at
predetermined forward rates, depending on forecast requirements, with settlement dates that are
within the next one month. The Group uses forward contracts purely as a hedging tool. It does
not take a position in currencies with a view to make speculative gains from currency movements.
The fair value of the forward foreign contracts are calculated based on current market rates. As
at 31 December 2012, the notional value of the outstanding forward currency contracts was
US$9.1 million (equivalent to S$11.1 million) (2011: US$14 million (equivalent to S$18.2 million).
Management has assessed that the fair value of the outstanding forward currency contracts to
be insignificant as at the balance sheet date.
In relation to its overseas investments in foreign subsidiaries whose net assets are exposed to
currency translation risks and which are held for long term investment purposes, the differences
arising from such translation are recorded under other comprehensive income and foreign currency
translation reserve. These translation differences are reviewed and monitored on a regular basis.
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