176 CapitaLand Integrated Commercial Trust Notes to the financial statements Year ended 31 December 2024 29 FINANCIAL RISK MANAGEMENT (continued) Interest rate risk (continued) In these hedge relationships, the main potential sources of ineffectiveness are: • the effect of the counterparty and the Group’s own credit risk on the fair value of the swaps, which is not reflected in the change in the fair value of the hedged cash flows attributable to the change in interest rates; and • differences in repricing dates between the swaps and the borrowings. Exposure to interest rate risk The Group’s exposure to changes in interest rates relates primarily to interest-bearing financial liabilities. Interest rate risk is managed on an ongoing basis with the primary objective of limiting the extent to which net interest expense could be affected by adverse movements in interest rates. The Group manages its interest rate exposure through the use of interest rate swaps, cross currency swaps and fixed rate borrowings. At the reporting date, the interest rate profile of the interest-bearing financial instruments, as reported to the management, was as follows: Group Trust Nominal amount Nominal amount 2024 2023 2024 2023 $’000 $’000 $’000 $’000 Fixed rate instruments Loans to joint ventures 160,650 160,650 136,350 136,350 Loans and borrowings (4,596,619) (5,099,100) (3,604,116) (3,554,116) Loans from non-controlling interests (34,589) (34,603) – – Effect of interest rate swaps and cross currency swaps (2,625,097) (2,246,144) (2,179,674) (1,582,840) (7,095,655) (7,219,197) (5,647,440) (5,000,606) Variable rate instruments Loans to subsidiaries – – 4,251,344 3,810,182 Loans and borrowings (4,362,118) (4,396,626) (3,392,867) (3,234,857) Effect of interest rate swaps and cross currency swaps 2,625,097 2,246,144 2,179,674 1,582,840 (1,737,021) (2,150,482) 3,038,151 2,158,165 Fair value sensitivity analysis for fixed rate instruments The Group does not account for any fixed rate instruments at fair value through profit or loss, and the Group does not designate derivatives as hedging instruments under a fair value hedge accounting model. Therefore, in respect of the fixed rate instruments, a change in interest rates at the reporting date would not affect the Statement of Total Return.
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