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Funding and Risk Management This section includes details on the Group's funding and outlines the market, credit and liquidity risks that the Group is exposed to and how these risks are managed, including the use of derivative financial instruments. 14. Funding costs/(income) Net funding costs and funding income include interest expense, interest income, amortisation of prepaid expenses and gains/losses on certain financial instruments that are recognised in earnings. Interest expense and income is recognised on an accrual basis in profit or loss using the effective interest method.
Year ended June 2018 NZ$M
Year ended June 2017 NZ$M
Fletcher Building Group
Interest income
(3) (3)
Cash and deposits
(2) (2)
Total interest income at amortised cost
Interest expense
91 29
Loans and derivatives
85 24
Capital notes
8
Other
(5)
Total interest expense at amortised cost
128
104
Changes in fair value relating to: Borrowings designated in a hedging relationship Derivatives designated in a hedging relationship
(31)
31
Total changes in fair value
32
Bank fees, registry and issue expenses
9
Funding costs 111 Included in interest expense is the net settlement of the Group's interest derivatives. This consists of $48 million of interest income and $47 million of interest expense (2017: $37 million interest income; $40 million interest expense). For items applying fair value hedges the gains or losses on the hedging instrument and on the hedged item net to zero. Included in bank fees, registry and issue expenses are one-off costs incurred in relation to breach of bank covenants. 157
75 Fletcher Building Limited Annual Report 2018
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