Notes to the consolidated financial statements

Set out below is a comparison by category of carrying values and fair values of all of the Group’s financial assets and financial liabilities as at 31 March 2011 and 31 March 2010.

(XLS:) Download Excel

 

 

31 March 2011

 

Notes

Amortised cost
£m

Derivatives and other items in a hedging relationship
£m

Held for trading
£m

Available- for-sale
£m

Total carrying value
£m

Fair value
£m

Available-for-sale financial assets

18

19

19

19

Trade and other receivables

23

274

274

274

Cash and cash equivalents

33

654

654

654

Derivative financial instruments – assets

20

42

141

183

183

Borrowings

28

(736)

(378)

(1 114)

(1 154)

Derivative financial instruments – liabilities

20

(55)

(127)

(182)

(182)

Trade and other payables

27

(400)

(400)

(400)

Total

 

(208)

(391)

14

19

(566)

(606)

(XLS:) Download Excel

 

 

31 March 2010

 

Notes

Amortised cost
£m

Derivatives and other items in a hedging relationship
£m

Held for trading
£m

Available- for-sale
£m

Total carrying value
£m

Fair value
£m

Available-for-sale financial assets

18

14

14

14

Trade and other receivables

23

398

398

398

Cash and cash equivalents

33

504

504

504

Derivative financial instruments – assets

20

48

151

199

199

Borrowings

28

(819)

(490)

(1 309)

(1 318)

Derivative financial instruments – liabilities

20

(75)

(117)

(192)

(192)

Trade and other payables

27

(465)

(465)

(465)

Total

 

(382)

(517)

34

14

(851)

(860)

Trade and other receivables presented above excludes £18 million
(2010 – £28 million) relating to prepayments.

Trade and other payables presented above excludes £7 million (2010 – £12 million) relating to social security. At 31 March 2010, £9 million in respect of deferred income relating to Transitional Aid was excluded.

Included in borrowings are other items in a hedging relationship which are held at amortised cost with a fair value adjustment applied, as they are in a fair value hedge.

Fair value hierarchy

Set out below is how the Group’s financial instruments measured at fair value, fit within the following fair value hierarchy:

  • quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
  • inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly (level 2);
  • inputs for the asset or liability that are not based on observable market data (level 3).

The following tables illustrate the Group’s financial assets and liabilities measured at fair value at 31 March 2011 and 31 March 2010:

(XLS:) Download Excel

 

 

31 March 2011

 

Notes

Level 1
£m

Level 2
£m

Level 3
£m

Total
£m

Assets at fair value

 

 

 

 

 

Available-for-sale financial assets

18

19

19

Derivative financial instruments:

 

 

 

 

 

– currency swaps

20

16

16

– interest rate swaps

20

40

40

– forward foreign exchange contracts

20

10

10

– commodity pricing contracts

20

53

50

14

117

Assets at fair value

 

53

116

33

202

 

 

 

 

 

 

Liabilities at fair value

 

 

 

 

 

Derivative financial instruments:

 

 

 

 

 

– currency swaps

20

(46)

(46)

– interest rate swaps

20

(14)

(14)

– forward foreign exchange contracts

20

(10)

(10)

– commodity pricing contracts

20

(21)

(77)

(14)

(112)

Borrowings

 

(378)

(378)

Liabilities at fair value

 

(21)

(525)

(14)

(560)

(XLS:) Download Excel

 

 

31 March 2010

 

Notes

Level 1
£m

Level 2
£m

Level 3
£m

Total
£m

Assets at fair value

 

 

 

 

 

Available-for-sale financial assets

18

14

14

Derivative financial instruments:

 

 

 

 

 

– currency swaps

20

28

28

– interest rate swaps

20

38

38

– forward foreign exchange contracts

20

4

4

– commodity pricing contracts

20

61

58

10

129

Assets at fair value

 

61

128

24

213

 

 

 

 

 

 

Liabilities at fair value

 

 

 

 

 

Derivative financial instruments:

 

 

 

 

 

– currency swaps

20

(58)

(58)

– interest rate swaps

20

(17)

(17)

– forward foreign exchange contracts

20

(10)

(10)

– commodity pricing contracts

20

(86)

(18)

(3)

(107)

Borrowings

 

(490)

(490)

Liabilities at fair value

 

(86)

(593)

(3)

(682)

Level 1 financial instruments

The fair value of financial instruments traded in active markets (commodity futures) is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

Level 2 financial instruments

The fair values of financial instruments that are not traded in an active market (interest rate swaps, cross currency swaps, commodity pricing contracts and forward foreign exchange contracts) are determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates.

The fair value of interest rate swaps, currency swaps and forward foreign exchange contracts is calculated as the present value of the future cash flows based on observable inputs drawn from interest yield curves sourced from a reputable third party source.

The amount shown within level 2 for borrowings only includes those borrowings which are designated as hedged items in fair value hedges with respect to interest rate risk and whose carrying amount is adjusted for the gain or loss on the hedged item attributable to the hedged risk.

Level 3 financial instruments

The fair value of financial instruments is based on unobservable inputs that are supported by little or no market activity at the balance sheet date. These inputs generally reflect the entity’s own assumptions about how a market participant would reasonably be expected to determine the price of a financial instrument.

For commodity pricing contracts, in evaluating the significance of fair value inputs, the Group generally classifies assets or liabilities as level 3 when their fair value is determined using unobservable inputs that individually, or when aggregated with other unobservable inputs represent more than 10% of the fair value of the observable inputs of the assets or liabilities.

Available-for-sale financial assets which are analysed at level 3 primarily represent investments in unlisted securities. The fair values of the unlisted securities are approximated at cost. Hence, value is adjusted only for permanent impairment and for no other movement.

For financial instruments in level 3, the Group does not consider that changes to inputs to reasonable alternatives would have a material impact on the income statement or equity.

The following table reconciles the movement in the Group’s financial instruments classified in level 3 of the fair value hierarchy:

(XLS:) Download Excel

 

Commodity pricing contracts
– assets
£m

Commodity pricing contracts
– liabilites
£m

Available-for-sale assets
£m

Total
£m

At 1 April 2009

21

11

32

Total gains or losses in operating profit

10

(3)

7

Purchases

3

3

Settlements

(21)

(21)

At 31 March 2010

10

(3)

14

21

Total gains or losses:

 

 

 

 

– in operating profit

14

(14)

– in other comprehensive income

1

1

Purchases

5

5

Settlements

(10)

3

(1)

(8)

At 31 March 2011

14

(14)

19

19