annual report - Harvey Norman Company Reports & Announcements

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 34. Financial Risk Management (continued) (i) Foreign Currency Risk Management (continued) The sensitivity increases and decreases in exchange rates have been selected as this is considered reasonable given the current level of exchange rates and the volatility observed both on a 5-year historical data basis and market expectations for potential future movement. The sensitivities of post tax profit in 2012 is comparable to 2011. The movements in other comprehensive income in 2012 are more sensitive than in 2011 because of the increased use of foreign currency contracts designated as cash flow hedges. (ii) Interest Rate Risk Management Interest rate risk refers to the risk that movements in variable interest rates will affect financial performance by increasing interest expenses or reducing interest income. Interest rate risk arises from financial assets and liabilities that are subject to floating interest rates. The consolidated entity‟s exposure to market interest rates relates primarily to: Cash and cash equivalents; Non-trade debts receivable from related parties and other unrelated persons; Bank overdraft; Non-trade amounts owing to related parties and other unrelated persons; Borrowings; and Bills payable. The consolidated entity manages the interest rate exposure by adjusting the ratio of fixed interest debt to variable interest debt to management‟s desired level based on current market conditions. Where the actual interest rate profile on the physical debt profile differs substantially from the desired target, the consolidated entity uses derivatives, principally interest rate swaps, to adjust towards the target net debt profile. Under the interest rate swaps the consolidated entity agrees with other parties to exchange, at specified intervals, the difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional principal amounts. Fixed interest rate maturing in 30 June 2012 Principal Subject to Over More Non- Floating 1 year 1 to 5 than interest Average interest rate interest rate or less years 5 years bearing Total $000 $000 $000 $000 $000 $000 Floating Fixed Financial assets Cash Consumer finance 126,245 31,300 - - 14,914 172,459 0.20%-5.96% 0.045%-0.86% Loans Finance lease - 96 44 - 4,041 4,181 - 9.00%-12.50% receivables - 9,907 8,879 - - 18,786 - 10.50%-12.50% Trade debtors Other financial - - - - 985,926 985,926 - - assets Non-trade - - - - 33,751 33,751 - - debtors & loans 19,511 4,144 673 - 1,030 25,358 6.65%-9.46% 5.00%-12.50% 145,756 45,447 9,596 - 1,039,662 1,240,461 Financial liabilities Bank overdraft 32,366 - - - - 32,366 2.22%-3.47% - Borrowings (*) Interest rate swaps (notional 671,211 464 - - - 671,675 0.63%-6.65% 3.67%-5.47% amount) - (100,000) (350,000) - - (450,000) - 4.97%-5.54% Net exposure 671,211 (99,536) (350,000) - - 221,675 0.63%-6.65% 3.67%-5.54% Trade creditors Finance lease - - - - 647,279 647,279 - - liabilities - 117 12 - - 129 - 3.24%-9.50% Other loans Bills payable (*) 44,578 107 - - 84 44,769 4.50%-6.46% 5.00%-12.00% - Australia 9,750 - - - - 9,750 3.69%-4.96% - - Slovenia Other financial 675 - - - - 675 1.70%-3.57% - liabilities - 1,015 18,784 - 184 19,983 - 4.97%-5.54% 758,580 1,703 18,796 - 647,547 1,426,626 113
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 34. 114 Financial Risk Management (continued) (ii) Interest Rate Risk Management (continued) Fixed interest rate maturing in 30 June 2011 Principal Subject to Over More Non- Floating 1 year 1 to 5 than interest Average interest rate interest rate or less years 5 years bearing Total $000 $000 $000 $000 $000 $000 Floating Fixed Financial assets Cash Consumer 102,175 48,361 - - 12,243 162,779 0.02%-10.40% 0.01%-3.00% finance loans Finance lease - 164 80 - 4,244 4,488 - 9.00%-12.50% receivables - 8,685 12,596 - - 21,281 - 10.5%-12.50% Trade debtors Other financial - - - - 1,023,332 1,023,332 - - assets Non-trade - - - - 49,523 49,523 - - debtors & loans 22,836 10,494 - - 1,737 35,067 6.87%-9.47% 7.00%-12.50% 125,011 67,704 12,676 - 1,091,079 1,296,470 Financial liabilities Bank overdraft 44,050 - - - - 44,050 2.40%-3.30% - Borrowings (*) Interest rate swaps (notional 512,786 - - - - 512,786 1.00%-7.60% - amount) - (100,000) (200,000) - - (300,000) - 4.97%-5.51% Net exposure 512,786 (100,000) (200,000) - - 212,786 1.00%-7.60% 4.97%-5.51% Trade creditors Finance lease - - - - 854,897 854,897 - - liabilities - 168 - - - 168 - 1.00%-9.50% Other loans Bills payable (*) 45,788 107 - - 87 45,982 5.62%-6.46% 9.00%-12.00% - Australia 9,750 - - - - 9,750 4.65%-4.91% - - Singapore 3,787 - - - - 3,787 0.34%-0.40% - - Slovenia - Space 33,503 - - - - 33,503 1.70%-3.50% - Malaysia Other financial 463 - - - - 463 3.67%-5.13% - liabilities - - 1,235 - 34 1,269 - 4.97%-5.51% 650,127 275 1,235 - 855,018 1,506,655 * The consolidated entity is required to pay interest costs at various floating rates of interest on bank bills. In order to protect part of the loans from exposure to increasing interest rates, the consolidated entity has entered into several interest rate swap contracts under which it is obliged to receive interest at variable rates and to pay interest at fixed rates. Sensitivity analysis The following sensitivity is based on interest rate risk exposures in existence at balance date: A sensitivity of 50 basis points increase and 50 basis points decrease has been selected as this is considered reasonable given the current level of both short term and long term Australian dollar interest rates. At 30 June 2012, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit and other comprehensive income would have been affected as follows:
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2012 ANNUAL REPORT HOLDINGS LIMITED
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2 Contents Company Information 1 Co
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CHAIRMAN‟S REPORT Business Perfor
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CHAIRMAN‟S REPORT (CONTINUED) Our
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CHAIRMAN‟S REPORT (CONTINUED) Bre
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CHAIRMAN‟S REPORT (CONTINUED) Sal
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CHAIRMAN‟S REPORT (CONTINUED) Slo
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DIRECTOR‟S REPORT Your directors
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DIRECTOR‟S REPORT (CONTINUED) Com
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DIRECTOR‟S REPORT (CONTINUED) Div
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DIRECTOR‟S REPORT (CONTINUED) Rem
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DIRECTORS‟ REPORT (CONTINUED) Rem
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DIRECTORS‟ REPORT (CONTINUED) Rem
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DIRECTORS‟ REPORT (CONTINUED) Aud
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CORPORATE GOVERNANCE STATEMENT (CON
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STATEMENT OF FINANCIAL POSITION AS
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STATEMENT OF COMPREHENSIVE INCOME F
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STATEMENT OF CHANGES IN EQUITY FOR
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STATEMENT OF CASH FLOWS FOR THE YEA
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OPERATING SEGMENTS (CONTINUED) Oper
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OPERATING SEGMENTS (CONTINUED) OPER
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OPERATING SEGMENTS (CONTINUED) Oper
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STATEMENT OF SIGNIFICANT ACCOUNTING
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Page 63 and 64: STATEMENT OF SIGNIFICANT ACCOUNTING
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