171
AirAsia X Berhad • Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2014
29 FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED)
(d)
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell
assets to reduce debt.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is
calculated as total borrowings (including “current and non-current borrowings” as shown in the Group and Company’s balance sheets) less cash and cash equivalents. Total
capital is calculated as ‘equity’ as shown in the Group and Company’s balance sheets plus net debt.
During 2014, the Group’s strategy, which was unchanged from 2013. The gearing ratio as at the 31 December 2014 and 2013 were as follows:
Group
Company
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Total borrowings (Note 25)
1,579,345
1,996,253
1,579,345
1,996,253
Less: Cash and cash equivalents (Note 23)
(74,937)
(212,089)
(74,506)
(211,890)
Net debt
1,504,408
1,784,164
1,504,839
1,784,363
Total equity attributable to equity holders of the Group and Company
703,630
1,236,155
737,862
1,234,921
Total capital
2,208,038
3,020,319
2,242,701
3,019,284
Gearing ratio
68.1%
59.1%
67.1%
59.1%
The Group and the Company are in compliance with all externally imposed capital requirements for the financial years ended 31 December 2014 and 31 December 2013, except
that the Group and the Company did not meet certain financial ratio covenants for three borrowing facilities totalling RM173 million as at 31 December 2014. Consequently,
borrowing facilities amounting to RM138 million were reclassified as short term borrowings under current liabilities at that date. The remaining RM35 million of borrowing
facility was already classified as short term borrowings under current liabilities as it is repayable within a year. The respective lenders had granted indulgences to the Group
and the Company from having to comply with the financial covenant ratios for the financial year ended 31 December 2014. As the covenants are enforced annually, the Group
monitors compliance with the financial covenant ratios at the end of each financial year. In the event of a breach, the Group will seek indulgences from the respective banks to
ensure that the Group and the Company are not in default of any borrowings. The Group’s and the Company’s overall strategy for capital risk management remains unchanged.
(e)
Fair value measurement
The carrying amounts of cash and cash equivalents, trade and other current assets, and trade and other current liabilities approximate their respective fair values due to the
relatively short-term maturity of these financial instruments. The fair values of other classes of financial assets and liabilities are disclosed in the respective notes to financial
statements.
Determination of fair value and fair value hierarchy
The Group’s financial instruments are measured in the balance sheet at fair value. Disclosure of fair value measurements are by level of the following fair value measurement
hierarchy:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from
prices) (level 2);
• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
