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NOTES TO AND FORMING
PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
168
PAKISTANOILFIELDS LIMITED
(c)
Market risk
(i) Currency risk
Foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in foreign exchange rates. Foreign exchange risk arises mainly from
future commercial transactions or receivables and payables that exist due to transactions in foreign
currencies.
The Company 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 costs.
Financial assets include Rs 48,920,065 thousand (2019: Rs 36,206,859 thousand) and financial
liabilities include Rs 226,988 thousand (2019: Rs 1,751,687 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 13,451,018 thousand lower/higher (2019: Rs 1,585,050 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 Company 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 43,046,489 thousand (2019: Rs 35,756,123 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 275,390 thousand (2019: Rs 174,511 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.
The Company is exposed to equity securities price risk because of investments held by the Company
and classified on the statement of financial position as investments classified as fair value through
profit or loss . To manage its price risk arising from investments in equity securities, the Company
diversifies its portfolio. Diversification of the portfolio is done in accordance with the investment
policy of the Company.