2009-10 Annual Report - Australia Post

29 Financial and capital risk management (continued)
(f) Foreign currency risk management
Foreign currency risk refers to the risk that the fair value or future cashflows of a financial instrument will fluctuate due to changes in foreign
exchange rates. the corporation and the group are exposed to foreign currency risk primarily through undertaking certain transactions denominated
in foreign currency. a major source of foreign exchange transaction risk is as a result of obligations with overseas postal administrations which
are invoiced in special drawing rights (sdr) and settled in euros (eur) and united states dollars (us$). the sdr is a basket currency composed
of fixed quantities of the four major traded currencies (us$, Japanese yen, eur and pound sterling). the composition of the basket is set by the
international Monetary Fund. international mail receipts and payments are highly variable in amount and timing, as well as being ongoing in nature.
the corporation and the group operate foreign currency–denominated bank accounts. immaterial bank account balances are not included.
the carrying amount of monetary assets and monetary liabilities as at balance date is as follows:
trade and other receivables
trade and other payables
cash on hand
corporation and consolidated
2010
(Aud) $m
161.5
(82.7)
5.5
2009
(aud) $m
net exposure 84.3 63.4
191.7
(128.5)
0.2
other major sources of foreign exchange transaction risk are as a result of foreign sourced and priced capital equipment, purchases or sales in foreign
currencies (including fuel purchases), commitments in respect to overseas jointly controlled entities and foreign currency bank accounts. each foreign
currency exposure, other than sdr, is measured and managed on an item by item basis and individual exposures over $500,000 are hedged through
the use of forward currency contracts.
Forward currency contracts
the following table details the forward currency contracts outstanding as at balance date.
Average
exchange
rate
corporation and consolidated
2010 2009
notional
amount
us$m
average
exchange
rate
notional
amount
us$m
Buy usd
0–6 months 0.880 8.4 0.744 11.0
7–12 months 0.780 0.3 0.654 –
12 months + – – – –
8.7 11.0
all forward currency contracts are entered into on the basis of known or projected exposures. the corporation has elected to adopt cashflow
hedge accounting in respect of some of its foreign currency hedging activities. the fair value of forward currency contracts designated as
hedging instruments is an asset of $0.4 million (2009: liability of $1.1 million) for the corporation and the group. the portion of the gain or loss
on the designated forward currency contracts that are determined to be effective hedges are deferred and will be recognised in the measurement
of the underlying transaction.
as at balance date, the aggregate amount of unrealised gains/losses under forward currency contracts deferred in the hedging reserve related to
contracted future payments for inventory, computer software and computer equipment. it is anticipated that the payments will take place in the
12 months (2009: 9 months) after reporting date at which stage the amount deferred in equity will be included in the initial cost of the inventory,
computer software and equipment. it is anticipated that the amounts in relation to inventory will affect profit or loss over the next year and amounts
in relation to computer software and equipment will affect profit or loss over the next 5 to 20 years after the assets are available for use.
Foreign exchange translation exposures for foreign subsidiaries and jointly controlled entities are currently immaterial and therefore not hedged.
AustrAliA Post AnnuAl rePort 2009–10 | Financial and statutory reports 87