Australia Post Annual Report 2008–09

Notes to and forming part of the Financial Report for the year ended 30 June 2009
29 Financial and capital risk management (continued)
(h) Interest rate risk management (continued)
Interest rate swap contracts
Under interest rate swap contracts, the corporation agrees to exchange the difference between fixed and floating rate interest amounts calculated
on agreed notional principal amounts. Such contracts enable the corporation to mitigate the risk of changing interest rates on the fair value of issued
fixed rate debt held.
The following table details the notional principal amounts and remaining terms of interest rate swap contracts as at balance date.
Fixed for floating interest
1–2 years
2–5 years
104
Australia Post Annual Report 2008–09 | Financial and statutory reports
Fixed
interest
rate
0.00
5.66
Corporation and Consolidated
2009 2008
Notional
principal
amount
$m
0.0
555.0
Fixed
interest
rate
6.00
6.25
Notional
principal
amount
$m
300.0
230.0
555.0 530.0
The interest rate swap contracts settle on a six-monthly basis. The floating rate on the $230 million tranche is six-monthly BBSW minus
6.75 basis points, and the floating rate on the $325 million tranche is six-monthly BBSW plus 118.125 basis points. (2008: $300 million
tranche was six-monthly BBSW.)
Interest rate swap contracts are designated as fair value hedges in respect of interest rates. The gain or loss from remeasuring the hedging
instrument at fair value is recorded in earnings and, to the extent that the hedge is effective, the carrying amount of the borrowing is adjusted
by the gain or loss attributable to the hedged risk.
Interest rate sensitivity
The table below details the interest rate sensitivity analyses of the corporation and the group at the reporting date, holding all other variables
constant. A 75 (2008: 50) basis point change is deemed to be reasonably possible and is used when reporting interest rate risk. The sensitivity
analyses below have been determined based on the exposure to interest rates from financial instruments at the reporting date and the stipulated
change taking place at the beginning of the financial year and being held constant throughout the reporting period.
The method used to arrive at the possible change of 75 (2008: 50) basis points was based on both statistical and non-statistical analysis.
The statistical analysis has been based on the cash rate for the past five years issued by the Reserve Bank of Australia as the underlying dataset.
This information is then revised and adjusted for reasonableness under the current economic circumstances.
75 (2008: 50) basis points is considered reasonable because it is reasonably possible that there will be greater volatility compared to that which
has been experienced in recent years, yet not to the extent of the extraordinary volatility experienced in the year ended 30 June 2009.
A positive number indicates an increase in profit after tax, while a negative number indicates a reduction in profit after tax. There is no
sensitivity on equity.
Impact on profit after tax at reporting date,with all other variables held constant of a:
75 (2008: 50) basis point increase in interest rates
75 (2008: 50) basis point decrease in interest rates
2009
$m
Consolidated Corporation
The interest-bearing assets and liabilities on which the sensitivity is shown in the table above are considered representative of the corporation’s
and group’s average interest rate exposure for the years ended 30 June 2008 and 30 June 2009.
1.8
(1.8)
2008
$m
1.7
(1.7)
2009
$m
1.8
(1.8)
2008
$m
1.7
(1.7)