Financial statements
Section B: Notes to the Group financial statements for the year ended 30 June 2024
Section B: Notes to the Group financial statements for the year ended 30 June 2024
B14
Financial risk management and derivatives (continued)
Market risk Foreign exchange risk Foreign currency risk is the risk that the value of a financial commitment, forecast transaction, recognised asset or liability will fluctuate due to changes in foreign exchange rates. 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. The Group has foreign currency risk from borrowings denominated in foreign currencies, investments and operating activities. The Group uses hedging instruments such as cross-currency interest rate swaps, as well as natural hedges such as foreign currency-denominated operating exposures and foreign currency borrowings, to manage these exposures. The Group generally manages exposures from investments in foreign assets using foreign currency borrowings comprising borrowings denominated in CAD and a portion of the Group’s borrowings denominated in USD. For all other borrowings denominated in foreign currencies the Group manages foreign currency risk over the life of the borrowing by converting these borrowings to Australian dollars using cross-currency interest rate swaps. The Group’s policy is to ensure that, at any time, all known material operating exposures for the following 12 months are hedged using hedging instruments or by drawing on foreign currency funds. Exposure The Group's exposures to foreign currency risk after hedging at the reporting date, denominated in the currency in which the risk arises are as follows: 2024 Local 2023 Local M M USD EUR CAD CHF NOK USD EUR CAD CHF NOK Cash and cash equivalents 82 — 28 — — 59 — 63 — — Trade payables 8 — — — — 5 — — — — Net investment in foreign operation 2,166 — 341 — — 2,232 — 385 — — Borrowings (4,143) (4,950) (650) (565) (750) (4,143) (3,956) (650) (565) (750) Foreign exchange forwards 10 — 288 — — 2 — 280 — — Cross-currency interest rate swaps 3,643 4,950 — 565 750 3,643 3,950 — 565 750 Net exposure to foreign currency risk 1,766 — 7 — — 1,798 (6) 78 — — Hedging instruments Financial instruments designated as hedging instruments of foreign currency risk and the effects of the hedge accounting relationship are as follows: 2024 2023 $M $M Borrowings hedging net investment in foreign operation—USD Carrying amount of borrowings 754 754 USD carrying amount of borrowings 500 500
February 2026
February 2026
Maturity dates
1:1
Hedge ratio
1:1
—
Change in carrying amount of borrowings as a result of foreign currency movements Change in value of hedged item used to determine hedge effectiveness
(28)
(1)
125
Borrowings hedging net investment in foreign operation—CAD¹ Carrying amount of borrowings
407 370
421 370
CAD carrying amount of borrowings
November 2028
November 2028
Maturity dates
1:1
Hedge ratio
1:1
14
Change in carrying amount of borrowings as a result of foreign currency movements Change in value of hedged item used to determine hedge effectiveness
(16)
(13)
17
1. During FY23, the Group completed the sale of its controlling interest in A25 which resulted in the derecognition of the existing net investment hedge of foreign operations - CAD. From the date of the change in control of A25 on 1 March 2023, the Group has designated a new net investment hedge of its equity accounted investment in the CAD asset.
153
152
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