Notes to the consolidated financial statements

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31 March 2010

31 March 2009

 

Assets
£m

Liabilities
£m

Assets
£m

Liabilities
£m

Non-current derivative financial instruments used to manage the Group’s net debt profile

 

 

 

 

Currency swaps – fair value, net investment and cash flow hedges

(51)

5

(45)

Currency swaps – held for trading

16

(2)

Interest rate swaps – fair value hedges

22

(3)

29

(7)

Interest rate swaps – held for trading

9

(11)

13

(15)

 

47

(67)

47

(67)

Current derivative financial instruments used to manage the Group’s net debt profile

 

 

 

 

Currency swaps – accrued interest

12

(5)

10

(3)

Interest rate swaps – accrued interest

7

(3)

3

(3)

 

19

(8)

13

(6)

Total derivative financial instruments used to manage the Group’s net debt profile

66

(75)

60

(73)

 

 

 

 

 

Other non-current derivative financial instruments

 

 

 

 

Forward foreign exchange contracts – cash flow hedges

1

(2)

Commodity pricing contracts – cash flow hedges

1

(3)

 

2

(5)

Other current derivative financial instruments

 

 

 

 

Forward foreign exchange contracts – cash flow hedges

3

(6)

12

(23)

Forward foreign exchange contracts – held for trading

(4)

Commodity pricing contracts – cash flow hedges

2

(7)

10

(30)

Commodity pricing contracts – held for trading

126

(100)

165

(209)

 

131

(117)

187

(262)

Total other derivative financial instruments

133

(117)

187

(267)

Total derivative financial instruments

199

(192)

247

(340)

 

 

 

 

 

Presented in the statement of financial position as follows:

 

 

 

 

Non-current derivative financial instruments

49

(67)

47

(72)

Current derivative financial instruments

150

(125)

200

(268)

 

199

(192)

247

(340)

The comparative information has been re-presented as set out in Note 1.

The ineffective portion recognised in operating profit that arises from cash flow hedges amounts to a loss of £3 million (2009 – £4 million gain).

The ineffective portion recognised in operating profit that arises from net investment hedges amounts to a gain of £1 million (2009 – £1 million loss).

The ineffective portion recognised in net finance expense that arises from fair value hedges amounts to a gain of £1 million (2009 – £2 million loss).

In accordance with IAS 1 (revised) the Group has re-presented certain held for trading derivatives from current to non-current as set out in Note 1. As at 1 April 2008, £4 million of assets and £5 million of liabilities have been re-presented. There was no overall effect on the Group’s equity. The re-presented comparatives as at 1 April 2008 are as follows:

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1 April 2008

 

Assets
re-presented
£m

Liabilites
re-presented
£m

Non-current

40

(35)

Current

271

(262)

Total

311

(297)

Cash flow hedges

The Group employs forward foreign exchange contracts and commodity pricing contracts to hedge cash flow risk associated with forecast transactions. The notional principal amounts of the outstanding forward foreign exchange contracts are as follows:

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31 March

 

2010
£m

2009
£m

Euro

(68)

(50)

US dollar

(30)

2

Sterling

75

69

Singapore dollar

25

22

Other

(4)

(13)

Gains and losses recognised in the hedging reserve in equity (Note 25) on forward foreign exchange and commodity pricing contracts as of 31 March 2010 will be released to the income statement at various dates up to 30 months from the balance sheet date.

In addition, the Group hedges the interest cost of certain of its borrowings through the use of interest rate swaps. Gains and losses recognised in the hedging reserve in equity on interest rate swaps as of 31 March 2010 will be released to the income statement at various dates until the maturity of the underlying borrowings in June 2012. The notional principal amount of the outstanding interest rate swaps is £136 million (2009 – £142 million).

Fair value hedges

The Group employs currency and interest rate swap contracts to hedge the currency and interest rate risks associated with its borrowings. The notional principal amounts of the outstanding interest rate and currency swap contracts applied in fair value hedging relationships as of 31 March 2010 were £364 million and £100 million respectively (2009 – £227 million and £200 million respectively).

Net investment hedges

The Group employs currency swap contracts to hedge the currency risk associated with its net investments in subsidiaries located primarily in the USA and Europe. The notional principal amounts of the outstanding currency swap contracts applied in net investment hedging relationships as of 31 March 2010 were £298 million (31 March 2009 – £250 million). The fair value gain of £6 million (2009 – £48 million loss) on translation of the currency swap contracts to pounds sterling at the balance sheet date was recognised in the translation reserve in shareholders’ equity (Note 25).

In addition, at 31 March 2010, of the Group’s borrowings, a total of £564 million (2009 – £860 million) is designated as hedges of the net investments in overseas subsidiaries.

Debt-related derivatives held for trading

Currency swap contracts associated with the partial repurchase of the 6.5% Guaranteed Notes 2012 were closed out in November 2009 by entering into offsetting currency swap contracts. These swaps do not qualify for hedge accounting. The notional amounts of the outstanding currency swap contracts not designated within hedge relationships as at 31 March 2010 were £203 million (2009 – £nil million).

Some of the Group’s interest rate swap contracts hedge the Group’s exposure to interest rate risk, but do not qualify for hedge accounting. The notional amounts of the outstanding interest rate swap contracts not designated within hedge relationships as of 31 March 2010 were £231 million (2009 – £244 million).

In addition, at 31 March 2009, there were interest rate cap contracts outstanding with notional amounts of £109 million. These caps matured during the year ended 31 March 2010.

Trading contracts

Commodity pricing contracts held for trading relate to the Group’s commodity trading activities which are undertaken for the purposes of supporting underlying operations. Foreign exchange contracts held for trading are undertaken to hedge anticipated future contractual cash flows within the Group’s cereal sweetners and starches business.