Bradken Limited Annual Report 2015 - page 94

59 l BRADKEN LIMITED ANNUAL REPORT 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the consolidated financial statements
30 June 2015
(continued)
13 Derivative financial instruments
2015
2014
$'000
$'000
Current assets
876
-
456
-
Total current derivative financial instrument assets
1,332
-
Current liabilities
1,356
1,825
-
984
4,200
-
Total current derivative financial instrument liabilities
5,556
2,809
(a)
(i)
Interest rate swap and interest rate cap contracts - cash flow hedges
At balance date, the notional principal amounts and periods of expiry of the interest rate swap and cap contracts are as follows:
2015
2014
$'000
$'000
Interest rate swap contracts
1 - 2 years
40,000
-
2 - 3 years
-
40,000
40,000
40,000
(ii) Forward exchange contracts
Derivative on redeemable preference shares ((a)(iii))
At balance date these contracts were net assets of $456,000 (2014: $984,000 liability). The Group has classified these hedging
instruments to be effective hedges.
In the year ended 30 June 2015 there was a gain from the change in fair value of the asset of $1,440,000 (2014: loss of
$13,881,000)
The gain or loss from remeasuring the hedging instruments at fair value is deferred in equity in the hedging reserve, to the extent
that the hedge is effective, and re-classified into profit and loss when the hedged interest expense is recognised. The ineffective
portion is recognised in the income statement immediately.
It is the policy of the Group to enter into forward foreign exchange contracts to cover all foreign currency exposures greater than
$100,000 AUD.
The Group is party to derivative financial instruments in the normal course of business in order to hedge exposure to fluctuations
in interest and foreign exchange rates in accordance with the Group's financial risk management policies (refer to note 3).
Forward foreign exchange contracts -
cash flow hedges ((a)(ii))
Forward foreign exchange contracts ((a)(ii))
Interest rate swap and cap contracts -
cash flow hedges ((a)(i))
Bank loans of the Group had an average variable interest rate of 4.23% at 30 June 2015 (2014: 3.64%). It is policy to protect
part of the loans from exposure to increasing interest rates. Accordingly, the Group has entered into interest rate swap
contracts under which it is obliged to receive interest at variable rates and to pay interest at fixed rates. , and interest rate caps
which provide protection over an agreed interest rate level.
Cross currency interest rate swap contracts -
cash flow hedges ((a)(i))
A cross currency interest rate swap is in place for USD $50,000,000 with a maturity date between 3 and 4 years. The contract
requires settlement of receivable interest each 180 days (semi annually) and payable interest each 90 days.
The contracts require settlement of net interest receivable or payable each 90 days. The settlement dates coincide with the
dates on which interest is payable on the underlying debt. The contracts are settled on a net basis.
At balance date for the Group these contracts were net liabilities with fair value of $480,000 (2014: $1,825,000 liability). In the
year ended 30 June 2015 there was a gain from the change in fair value of $1,345,000 (2014: $485,000 gain).
Swaps currently in place cover approximately 13% of floating rate bank loans (2014: 14%). The average fixed interest for the
swaps and caps is 4.88 % (2014: 4.88%). The Group also entered into a Cross Currency Interest Rate Swap under which it is
obliged to receive fixed USD interest and pay variable AUD interest.
Instruments used by the Group
1...,84,85,86,87,88,89,90,91,92,93 95,96,97,98,99,100,101,102,103,104,...131
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