Illustrative disclosure of sensitivity analyses
Interest rate risk
At 31 December 2013, if interest rates at that date had been 10 basis points lower with all other variables held constant, post-tax profit for the year would have been €1.7 million (2012: €2.4 million) higher, arising mainly as a result of lower interest expense on variable borrowings, and other comprehensive income would have been €2.8 million (2012: €3.2 million) higher, arising mainly as a result of an increase in the fair value of fixed rate financial assets classified as available-for-sale.
If interest rates had been 10 basis points higher, with all other variables held constant, post-tax profit would have been €1.5 million (2012: €2.1 million) lower, arising mainly as a result of higher interest expense on variable borrowings, and other comprehensive income would have been €3.0 million (2012: €3.4 million) lower, arising mainly as a result of a decrease in the fair value of fixed rate financial assets classified as available-for-sale.
Profit is more sensitive to interest rate decreases than increases because of borrowings with capped interest rates. The sensitivity is lower in 2013 than in 2012 because of a reduction in outstanding borrowings that has occurred as the entity’s debt has matured (see note X).
Foreign currency exchange rate risk
At 31 December 2013, if the euro had weakened 10 percent against the US dollar with all other variables held constant, post-tax profit for the year would have been €2.8 million (2012: €6.4 million) lower, and other comprehensive income would have been €1.2 million (2012: €1.1 million) higher.
Conversely, if the euro had strengthened 10 percent against the US dollar with all other variables held constant, post-tax profit would have been €2.8 million (2012: €6.4 million) higher, and other comprehensive income would have been €1.2 million (2012: €1.1 million) lower.
The lower foreign currency exchange rate sensitivity in profit in 2013 compared with 2012 is attributable to a reduction in foreign currency denominated debt. Equity is more sensitive in 2013 than in 2012 because of the increased use of hedges of foreign currency purchases, offset by the reduction in foreign currency debt. [IFRS 7.IG36].