(ii) Interest Rate Risk  Interest rate risk is the risk that the fair value of future cash flows of financial assets and financial liabilities will fluctuate because  of changes in market interest rates. Interest rate risk is managed on a Group basis at the corporate level. As at 30 June 2011 and 30 June 2010, there was no borrowing outstanding and there was no interest rate hedging in place. The Group’s interest rate risk arises from relevant financial assets, primarily cash and cash equivalents deposited at variable rates  of interest and security deposits held in Brazil. Surplus cash is invested in short term bank deposits due to uncertainty of the timing of major cash outflows. Whilst some of the invested cash is in United States dollars, the primary exposure is to Australian interest rates. An analysis of the Group’s exposure to interest rate risk for financial assets and financial liabilities at the end of the financial year  is set out below: Consolidated 2011 2010 $  $ Change in profit (loss) - Improvement in AUD to USD by 10.0%  (7,479,610) (2,737,438) - Decline in AUD to USD by 10.0%  9,141,745 3,345,757 Change in financial assets - Improvement in AUD to USD by 10.0%  (7,807,288) (4,037,382) - Decline in AUD to USD by 10.0%  9,542,240 4,934,578 Change in financial liabilities - Improvement in AUD to USD by 10.0%  129,160 1,102,539 - Decline in AUD to USD by 10.0%  (157,862) (1,347,548) Change in foreign currency translation reserve - Improvement in AUD to USD by 10.0%  198,518 197,405 - Decline in AUD to USD by 10.0%  (242,633) (241,273) Consolidated Weighted  Floating  Fixed  Average  Interest  Interest Non-interest  Carrying Interest Rate  Rate  Rate  Bearing  Fair Value Amount 2011  % P.A.  $  $  $  $ $ Financial assets Cash and cash equivalents  4.3  80,585,111  184,939,247  1,314,786 266,839,144 266,839,144 Receivables  -  -  -  4,003,566  4,003,566 4,003,566 Security deposits  9.4  44,959,458  22,384,825  16,297  67,360,580 67,360,580 Total financial assets  125,544,569  207,324,072  5,334,649 338,203,290 338,203,290 Financial liabilities Trade and other payables  -  -  -  3,809,100  3,809,100 3,809,100 Total financial liabilities  -  -  3,809,100  3,809,100 3,809,100 51 Karoon Gas Australia Ltd  Annual Report 2011