annual report - Harvey Norman Company Reports & Announcements

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
34. Financial Risk Management (continued)
(ii) Interest Rate Risk Management (continued)
If there was 50 (2011: 50) basis points higher in interest
rates with all other variables held constant
If there was 50 (2011: 50) basis points lower in interest
rates with all other variables held constant
CONSOLIDA TED
Post Tax Profit
Other comprehensive
income
increase/(decrease)
increase/(decrease)
2012 2011 2012 2011
$000 $000 $000 $000
(2,320)
2,320
(2,000)
2,000
(2,542)
(8,673)
The movements in post tax profit are due to higher/lower interest costs from variable rate debt and cash balances.
The movement in other comprehensive income is due to an increase/decrease in the fair value of derivative
instruments designated as cash flow hedges.
1,845
(1,666)
The movements in post tax profit in 2012 are more sensitive than the movements in 2011 because of an increase in
financial liabilities that are subject to variable interest rates. The movements in other comprehensive income in 2012
are more sensitive than the movements in 2011 because of the increased use of interest rate swaps which are
designated as cash flow hedges.
(iii) Equity Price Risk Management
The consolidated entity is exposed to equity price risk arising from equity investments. Equity investments are held for
strategic rather than trading purposes. The consolidated entity does not actively trade these investments. The
exposure to the risk of a general decline in equity market values is not hedged as the consolidated entity believes
such a strategy is not cost effective. The fair value of the equity investments publicly traded on the ASX was $25.10
million as at 30 June 2012 (2011: $42.17 million). The fair value of the equity investments publicly traded on the NZX
was $9.19 million as at 30 June 2012 (2011: $6.08 million).
As at 30 June 2012, if equity prices had been 10% higher/lower while all other variables are held constant, post tax
profit and other comprehensive income would have been affected as follows:
If there was 10% (2011: 10%) increase movement in
equity prices with all other variables held constant
If there was 10% (2011: 10%) decrease movement in
equity prices with all other variables held constant
CONSOLIDA TED
Post Tax Profit
Other comprehensive
income
increase/(decrease)
increase/(decrease)
2012 2011 2012 2011
$000 $000 $000 $000
1,832
(1,832)
3,074
(3,074)
A sensitivity of 10% has been selected as this is considered reasonable given the current level of equity prices, the
volatility observed on a historic basis and market expectations for future movement.
719
(719)
427
(427)
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