Corporate Report for the year ended 30 June 2022
Introduction and overview
Business performance
Governance and risk
Directors’ report
Remuneration report
Financial statements
Sustainability supplement
Security holder information
Section B: Notes to the Group financial statements for the year ended 30 June 2022
Section B: Notes to the Group financial statements for the year ended 30 June 2022
B15 Derivatives and financial risk management Derivatives
2022
2021
$M
$M
Current Non-current
Current Non-current
Assets Interest rate swap contracts
— 22 — 22
264 734
— — — —
28
Cross-currency interest rate swap contracts
117
14
Power purchase agreements
—
1,012
Total derivative financial instrument assets
145
Liabilities Interest rate swap contracts
50 — 50
—
2
213 484 697
Cross-currency interest rate swap contracts Total derivative financial instrument liabilities
176 176
—
2
Accounting policy Initial recognition and subsequent measurement
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either: • hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges); • hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly probable forecast transactions (cash flow hedges); or • hedges of a net investment in a foreign operation (net investment hedges). At the inception of the hedging transaction the Group documents the relationship between the hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items. The fair values of various derivative financial instruments used for hedging purposes are disclosed in this note. The entire fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months. Cash flow hedges The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated in reserves in equity. The gain or loss relating to the ineffective portion is recognised immediately in the profit and loss. Amounts accumulated in equity are reclassified to the profit and loss in the periods when the hedged item affects the profit and loss. When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the profit and loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the profit and loss. The Group excludes currency basis spread from its cash flow hedge relationships where the designated hedging instrument is a cross-currency interest rate swap entered into on or after 1 July 2020. Changes in currency basis spread on swaps entered into from 1 July 2020 are recognised through other comprehensive income in a separate cost of hedging reserve (refer to Note B12). Net investment hedges Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive income and accumulated in reserves in equity. The gain or loss relating to the ineffective portion is recognised immediately in the profit and loss. Gains and losses accumulated in equity are included in the profit and loss when the foreign operation is partially disposed or sold. Derivatives that do not qualify for hedge accounting Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the profit and loss.
156 156
Made with FlippingBook Annual report maker