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69
APN
annual report
2011
notes to the financial statements
APN News & Media Limited and Controlled Entities
14. DERIVATIVE FINANCIAL INSTRUMENTS
2011
$’000
2010
$’000
Current assets
Interest rate swaps – cash flow hedge
–
263
Total current derivative assets
–
263
Non-current assets
Interest rate swaps – cash flow hedge
–
753
Total non-current derivative assets
–
753
Current liabilities
Interest rate swaps – cash flow hedge
646
–
Foreign currency contracts
132
235
Equity swap
–
248
Total current derivative liabilities
778
483
Non-current liabilities
Interest rate swaps – cash flow hedge
3,839
2,355
Foreign currency contracts
–
105
Total non-current derivative liabilities
3,839
2,460
(a) Interest rate swaps
The Group’s borrowings include amounts that bear variable interest rates. It is Group policy to protect part of the loans from exposure to
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.
Swaps currently in place cover approximately 56% (2010: 57%) of the variable loan principal outstanding and are timed to expire as each
loan repayment falls due. The fixed interest rates range between 4.1% and 5.3% (2010: 4.1% and 5.3%) per annum.
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.
The gain or loss from remeasuring the hedging instruments at fair value is recognised in other comprehensive income and deferred in
equity in the hedging reserve, to the extent that the hedge is effective. It is reclassified into profit or loss when the hedged interest expense
is recognised. In the year ended 31 December 2011 a loss of $2.3 million was reclassified into profit or loss (2010: loss of $2.7 million) and
included in finance costs. There was no hedge ineffectiveness in the current or prior year.
Two of the interest rate swaps held by the consolidated entity as at 31 December 2011 offset each other, having a notional principal amount
of NZ$83,538,019 (2010: NZ$107,420,200) each, and mature in the next 12 months.
The remaining swaps have a mark to market loss of $4,485,243 (2010: loss of $1,338,931). The tables below analyse these net settled interest
rate swaps into relative maturity groupings based on the remaining period at the reporting date to the contractual maturity date. For interest
rate swaps, the cash flows have been estimated using current interest rates applicable at the reporting date.
Less than
one year
$’000
Between
one and
two years
$’000
Between
two and
five years
$’000
Over
five years
$’000
31 December 2011
Net settled – interest rate swaps (outflow)
(2,124)
(577)
–
–
31 December 2010
Net settled – interest rate swaps (outflow)
(2,068)
(1,290)
(381)
–