The American Club 2017/2018 Annual Report

THE AMERICAN CLUB

NOTES TO FINANCIAL STATEMENTS 30 June 2018

4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL MANAGEMENT (cont’d)

(i) Foreign exchange risk management

The Club is not exposed to significant foreign currency exchange risk as the transactions are mainly denominated in Singapore dollars, which is the functional currency of the Club.

(ii) Interest rate risk

The main source of interest rate risk is the interest-bearing fixed deposit. The Club’s policy is to obtain favourable interest rates that are available.

Interest rate from interest income for the financial year is between 0.65% to 1.48% (2017 : 0.65% to 1.38%) per annum.

No sensitivity analysis is prepared as the Club does not expect any material effect on the Club’s profit and loss arising from the effects of reasonably possible changes to interest rates on interest bearing financial instruments at the end of the reporting period.

(iii) Credit risk management

Credit risk refers to the risk that members will default on their contractual obligations resulting in financial loss to the Club. The Club has adopted procedures in monitoring collections from members and in monitoring default of payments from members. The maximum exposure to credit risk in the event that members fail to perform their obligations as at the end of the financial year in relation to each class of recognised financial assets is the carrying amount of those assets stated in the statement of financial position.

The Club places its cash and investments with creditworthy financial institutions.

(iv) Market price risk management

Market price risk refers to the risk that the fair value or future cash flows of the Club’s financial instruments will fluctuate because of changes in market prices (other than interest or exchange rates). The Club is not exposed to market price risk. Specific investment guidelines are used to monitor the risk in the Club’s investments. No sensitivity analysis is prepared as the Club does not expect any material effect on the Club’s profit and loss arising from the effects of reasonably possible changes to market price on fair value of financial instruments at the end of the reporting period.

46 2017/18 ANNUAL REPORT