Download full Annual Report and Accounts - Kingfisher

82
Notes to the consolidated
fi nancial statements
23 Derivatives
The net fair value of derivatives by hedge designation at the balance sheet date is:
Kingfi sher plc
Annual Report
and Accounts
2009/10
£ millions 2009/10 2008/09
Fair value hedges 116 180
Cash fl ow hedges 2 20
Net investment hedges (28) (75)
Non-designated hedges (57) 48
33 173
Non-current assets 81 180
Current assets 24 107
Current liabilities (25) (38)
Non-current liabilities (47) (76)
33 173
The fair values are calculated by discounting future cash fl ows arising from the instruments and adjusting for credit risk. These fair value measurements are all
made using observable market rates of interest, foreign exchange and credit risk and are therefore classifi ed as ‘level 2’ in the IFRS 7, ‘Financial instruments:
Disclosures’, fair value hierarchy. At 30 January 2010 net derivative assets included in net debt amount to £20m (2008/09: £135m).
Fair value hedges
Interest rate swap contracts convert fi xed rate debt issued under the Group’s MTN programme and the US Private Placement to fl oating rate liabilities. At 30 January 2010
the Sterling equivalent amount of such contracts is £984m (2008/09: £1,391m). €307m of a €550m interest rate swap and £65m of a £150m interest rate swap have been
cancelled in the year.
Cash fl ow hedges
Forward foreign exchange contracts hedge currency exposures of forecast inventory purchases. At 30 January 2010 the Sterling equivalent amount of such
contracts is £264m (2008/09: £181m). The associated fair value gains and losses will be transferred to inventories when the purchases occur during the next
12 months. Gains of £5m (2008/09: £10m gains) have been transferred to inventories for contracts which matured during the year.
Swap contracts to hedge the cost of diesel oil for use in the business were entered into during the prior year. At 30 January 2010 the Sterling equivalent amount
of such contracts is £nil (2008/09: £4m).
Net investment hedges
Cross-currency interest rate swaps hedge currency exposures of overseas investments. At 30 January 2010 the Sterling equivalent amount of such contracts
is £138m (2008/09: £373m).
Non-designated hedges
The Group has entered into certain derivatives to provide a hedge against fl uctuations in the income statement arising from balance sheet positions. At 30 January 2010
the Sterling equivalent amount of such contracts is £1,100m (2008/09: £830m). These have not been accounted for as hedges, since the fair value movements of the
derivatives in the income statement offset the retranslation of the balance sheet positions. These include a cross-currrency swap, an interest rate swap and short term
foreign exchange contracts. A €330m cross-currency swap has matured in the year.
The Group has reviewed all signifi cant contracts for embedded derivatives and none of these contracts has any embedded derivatives which are not closely related to
the host contract and therefore the Group is not required to account for these separately.