Corporate Report for the year ended 30 June 2022
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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 (continued) Market risk Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk when future transactions and recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. Foreign currency exposures are viewed as either investment exposures or operating exposures. The Group generally manages exposures from investments in foreign assets using foreign currency debt. The Group’s policy is to ensure that, at any time, all known material operating exposures for the following twelve months are hedged using hedging instruments or are offset by drawing on foreign currency funds. The Group uses hedging instruments such as cross-currency swaps, as well as natural hedges such as foreign currency-denominated operating exposures and foreign currency borrowings, to manage these exposures. The effects of the foreign currency related hedging instruments on the Group’s financial position and performance are as follows:
2022
2021
$M
$M
Net investment in foreign operation—USD 1 Carrying amount
726 500
880 662
USD carrying amount
1:1
Hedge ratio
1:1
62
Increase in carrying amount of loan as a result of foreign currency movements Increase in value of hedged item used to determine hedge effectiveness
9
255
27
Net investment in foreign operation—CAD Carrying amount
638 567
583 544
CAD carrying amount
1:1
Hedge ratio
1:1
34 30
Increase in carrying amount of loan as a result of foreign currency movements Increase in value of hedged item used to determine hedge effectiveness
5 4
2022
2021
$M
$M
Cross-currency interest rate swaps Carrying amount
580
(367)
11,320
Notional amount
11,320
June 2023 to July 2034
June 2023 to July 2034
Maturity dates
1:1
Hedge ratio
1:1
775
Increase/(decrease) in discounted value of outstanding hedging instruments since inception (Decrease)/increase in value of hedged item used to determine hedge effectiveness
(663)
(782)
719
1. During the prior comparative period, the Group divested 50% of its equity interest in TC, which resulted in the discontinuation of the previous net investment hedge of the US assets. From the date of the change in control of TC on 31 March 2021, the Group has designated a new net investment hedge of its equity accounted investment in the US assets.
158 158
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