Page 75 - Sun Resources Annual Report 2013

22 Financial Risk Management
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and
price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability
of financial markets and seeks to minimise potential adverse effects on the performance of the Group. The Group
does not use derivative financial instruments such as foreign exchange contracts and interest rate swaps to hedge
certain risk exposures; preferring instead to hold money in bank accounts in the country and currency where
significant expenditure is expected to be incurred. Projected capital expenditure on exploration and production will
be funded by cash and capital raising (if required).
Risk management is carried out by the executives of the Group and approved by the board of Directors.
The Group’s financial instruments consist mainly of deposits with banks, local money market instruments, short-term
investments, accounts receivable and payable, loans to and from subsidiaries, leases and shares.
The Group holds the following financial instruments:
Consolidated
2013 2012
Financial Assets $ $
Cash and cash equivalents 3,550,749 1,224,499
Other receivables 342,046 16,604
Available-for-sale financial assets - 900
Other receivables (non-current) - 305,400
3,892,795 1,547,403
Financial Liabilities at amortised cost
Payables 6,107,815 94,948
a Market risk
i Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency
exposures, primarily with respect to the US dollar.
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities
denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity
analysis and cash flow forecasting.
Management have established a policy requiring Group companies to manage their foreign exchange risk
against their functional currency and hold money in bank accounts in the country and currency where significant
expenditure is expected to be incurred.
The Group’s exposure to foreign currency risk at the reporting date was as follows:
2013 2012
Group USD USD
Cash and cash equivalents 2,354,847 298,064
Other receivables: - 310,322
Receivables - oil sales/bond 307,478 -
Group sensitivity
Based on the financial instruments held at the 30 June 2013 as listed above, had the Australian Dollar
weakened/strengthened by 10% against the US dollar with all other variables held constant, the Group’s post-
tax loss for the year would have been $291,096 lower/higher (2012: $61,819 lower/higher), mainly as a result of
foreign exchange gains/ losses on translation of US dollar denominated financial instruments as detailed in the
above table. The Group has used 10% based on historical averages as reasonable.
SUN RESOURCES ANNUAL REPORT 2013 73
NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS