Topics: Finance, Corporate finance, Credit risk Pages: 6 (1703 words) Published: May 20, 2013
2.4 Main Controlled Entities (as at June 2012)
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(c): Name of entityCountry of incorporation Class of shares Equity holding 2012 2011

% %
Parent entity
JB Hi-Fi Limited (i)
JB Hi-Fi Group Pty Ltd (ii) Australia Ordinary 100 100 JB Hi-Fi (A) Pty Ltd (ii) Australia Ordinary 100 100 Clive Anthonys Pty Ltd (ii) Australia Ordinary 100 100 Rocket Replacements Pty Ltd (ii) Australia Ordinary 100 100 JB Hi-Fi Group (NZ) Limited New Zealand Ordinary 100 100 JB Hi-Fi NZ Limited New Zealand Ordinary 100 100

(i) JB Hi-Fi Limited is the head entity within the tax-consolidated group. (ii) These wholly-owned subsidiaries are members of the tax-consolidated group. In addition, JB Hi-Fi Limited has effective control over the JB Hi-Fi Limited Employee Share Trust, which administers shares issued through the Company's employee option plan. This entity is also consolidated.

2.5 Geographic Locations
(As at 31 Dec 2012)

RevenueProfit Assets
(AUD’000) (AUD’000)(AUD’000)
Australia 1,724,002136,843921,769
New Zealand92,2462,96767,112

(As at 31 Dec 2011)
RevenueProfit Assets
(AUD’000) (AUD’000)(AUD’000)
Australia 1,677,286133,436827,593
New Zealand97,4432,67060,695

3.3 Risk and Solutions
(a) Market risk
(i) Foreign currency risk management
The majority of the Group’s operations are denominated in the functional currency of the country of operation and are therefore not exposed to foreign currency risk. That is, transactions and balances related to the Australian operations are denominated in Australian dollars and transactions and balances related to the New Zealand operations are denominated in New Zealand dollars. (ii) Cash flow and fair value interest rate risk

The Group is exposed to interest rate risk as it borrows funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings and by the use of interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring optimal hedging strategies are applied, by either positioning the balance sheet or protecting interest expense through different interest rate cycles. Interest rate swap contracts

Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the cash flow exposures on the issued variable rate debt held. The fair value of interest rate swaps at the reporting date is determined by discounting the future cash flows using the curves at reporting date and the credit risk inherent in the contract, as disclosed below. The average interest rate is based on the outstanding balances at the start of the financial year. (b) Liquidity risk

Ultimate responsibility for liquidity risk management rests with the board of directors, who assess the Group’s short, medium and long term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities and by continuously monitoring forecast and actual cash flows. (c) Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has endeavoured to minimise its credit risk by dealing with creditworthy...
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