Bradken Limited Annual Report 2015 - page 95

BRADKEN LIMITED ANNUAL REPORT 2015 l 60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the consolidated financial statements
30 June 2015
(continued)
13 Derivative financial instruments (continued)
(iii) Derivative on redeemable preference shares
Conversion price $2.00
Spot Price: $1.44
Stock price volatility 50%
Risk-free interest rate 2.35%
Maturity date: Perpetual
Please refer to note 20 for further details of the Redeemable Preference Share issuance.
(b)
(c) Offsetting financial assets and liabilities
Bradken presents derivative assets and liabilities on a gross basis. Certain derivative assets and liabilities are subject to
enforceable master netting arrangements with individual counterparites if they were subject to default. As at 30 June 2015, if
these netting arrangements were to be applied to the deriviatives portfolio, derivative assets are reduced by $0.84m (30 June 14
$0.58m) and derivative liabilities reduced by $0.84m (30 June 14 $0.58m).
Risk exposures and fair values
The derivative on the Redeemable Preference Shares relates to the ability of the holder to convert a portion of the instrument
into ordinary shares of the Group. This value has been determined using the binomial tree lattice methodology with the following
assumptions:
Further information about the Group's exposure to credit risk, foreign exchange risk and interest rate risk is provided in note 3.
Further information about the fair value of the Group's derivatives is provided in note 3.
1...,85,86,87,88,89,90,91,92,93,94 96,97,98,99,100,101,102,103,104,105,...131
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