Notes to the
fnancial
statements
for the year ended 30 June 2011 –
Wesfarmers Limited and its controlled entities
143
Wesfarmers Annual Report 2011
26: Financial risk management objectives and policies (continued)
(b) Market risk (continued)
The sensitivity analysis below shows the impact that a reasonably possible change in foreign exchange rates over a fnancial year would have on
proft after tax and equity, based solely on the Group’s foreign exchange risk exposures existing at the balance sheet date. The Group has used
the observed range of actual historical rates for the preceding fve year period, with a heavier weighting placed on recently observed market
data, in determining reasonably possible exchange movements to be used for the current year’s sensitivity analysis. Past movements are not
necessarily indicative of future movements.
The following rates have been used in performing the sensitivity analysis:
2011
2010
Actual
+10%
–10%
Actual
+10%
–10%
US dollar
1.07 1.18
0.96
0.85
0.94
0.77
Euro
0.74 0.81
0.67
0.70
0.77
0.63
The impact on proft and equity is estimated by relating the hypothetical changes in the US dollar and Euro exchange rate to the balance of
fnancial instruments at the reporting date. Foreign currency risks, as defned by AASB 7
Financial Instruments: Disclosures
, arise on account
of fnancial instruments being denominated in a currency that is not the functional currency in which the fnancial instrument is measured.
Differences from the translation of fnancial statements into the Group’s presentation currency are not taken into consideration and the impact is
not material to the Group. Therefore, no sensitivity analysis is performed for exposure to the NZ dollar as the amount is immaterial to the Group.
The results of the foreign exchange rate sensitivity analysis are driven by three main factors, as outlined below:
–– the impact of applying the above foreign exchange movements to fnancial instruments that are not in hedge relationships will be recognised
directly in proft;
–– to the extent that the foreign currency denominated derivatives on balance sheet form part of an effective cash fow hedge relationship,
any fair value movements caused by applying the above sensitivity movements will be deferred in equity and will not affect proft; and
–– movements in fnancial instruments forming part of an effective fair value hedge relationship will be recognised in proft. However,
as a corresponding entry will be recognised for the hedged item, there will be no net effect on proft.
At 30 June 2011, had the Australian dollar moved against the US dollar and Euro, as illustrated in the table above, with all other variables held
constant, the Group’s proft after tax and other equity would have been affected by the change in value of its fnancial assets and fnancial
liabilities, as follows:
AUD/USD +10% AUD/USD –10%
AUD/EUR +10% AUD/EUR –10%
USD Impact on Impact on Impact on Impact on EUR Impact on Impact on Impact on Impact on
exposure proft equity proft equity exposure proft equity proft equity
CONSOLIDATED
A$m A$m A$m A$m A$m A$m A$m A$m A$m A$m
YEAR ENDED 30 JUNE 2011
Financial assets
Cash and cash equivalents
55
(4)
–
4
–
6
–
–
–
–
Trade and other receivables
118
(8)
–
9
–
5
–
–
–
–
Hedge foreign exchange
derivative assets
335
–
55
–
(70)
–
–
–
–
–
Financial liabilities
Trade and other payables
162
11
–
(13)
–
15
1
–
(1)
–
Interest‑bearing loans
and borrowings
1,236
79
–
(97)
– 673
44
–
(54)
–
Cross currency interest rate swap
78
(79)
(5)
97
6
91
(44)
–
54
–
Hedge foreign exchange
derivative liabilities
–
–
–
–
–
2
–
(4)
–
5
Net impact
(1)
50
–
(64)
1
(4)
(1)
5