Brambles 2006 Annual Report - Alle jaarverslagen

99
Brambles
2006 Annual Report
Derivative instruments used by Brambles, which are used solely
for hedging purposes (ie to offset foreign exchange and interest
rate risks), comprise interest rate swaps, caps, collars, forward
rate agreements and forward foreign exchange contracts.
Such derivative instruments are used to alter the risk profile
of Brambles’ existing underlying exposure in line with Brambles’
risk management policies.
To 30 June 2005
Since all derivative instruments employed by Brambles are used
solely for hedging purposes, they are all designated as hedging
instruments. Brambles defers the impact of the derivative
instruments on profit until it recognises the underlying hedged
item in the income statement.
Interest differentials under interest rate swaps, caps and collars
are recognised by adjustment of the underlying interest receivable
or payable over the term of the agreement and as such are
accrued to profit or loss on a time apportioned basis.
Currency swap agreements and forward foreign exchange
contracts are valued at closing exchange rates.
Resulting gains and losses are offset against foreign exchange
gains or losses on the related borrowings or, where the
instrument is used to hedge a committed future transaction,
are deferred until the transaction occurs and shown within debtors
or creditors as appropriate.
From 1 July 2005
(when IAS 32/AASB 132 and IAS 39/AASB 139 apply)
Derivative financial instruments are stated at fair value. The fair
value of forward exchange contracts is calculated by reference
to current forward exchange rates for contracts with similar
maturities at the balance sheet date. The fair value of interest rate
swap contracts is calculated as the present value of the forward
cash flows of the instrument after applying market rates and
standard valuation techniques.
For the purposes of hedge accounting, hedges are classified
as either fair value hedges or cash flow hedges.
Fair value hedges
Fair value hedges are derivatives that hedge exposure to
changes in the fair value of a recognised asset or liability, or an
unrecognised firm commitment. In relation to fair value hedges
which meet the conditions for hedge accounting, any gain or
loss from remeasuring the hedging instrument at fair value is
recognised immediately in the income statement.
Any gain or loss attributable to the hedged risk on remeasurement
of the hedged item is adjusted against the carrying amount of the
hedged item and recognised in the income statement. Where the
adjustment is to the carrying amount of a hedged interest-bearing
financial instrument, the adjustment is amortised to the income
statement such that it is fully amortised by maturity.
Hedge accounting is discontinued prospectively if the hedge
is terminated or no longer meets the hedge accounting criteria.
In this case, any adjustment to the carrying amounts of the
hedged item for the designated risk for interest-bearing financial
instruments is amortised to the income statement following
termination of the hedge.
Cash flow hedges
Cash flow hedges are derivatives that hedge exposure to
variability in cash flows that is either attributable to a particular risk
associated with a recognised asset or liability, or a highly probable
forecast transaction.
In relation to cash flow hedges to hedge forecast transactions
which meet the conditions for hedge accounting, the portion
of the gain or loss on the hedging instrument that is determined
to be an effective hedge is recognised directly in equity and the
ineffective portion is recognised in the income statement.
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated or exercised, or no longer qualifies
for hedge accounting.
At that point in time, any cumulative gain or loss on the hedging
instrument recognised in equity is kept in equity until the forecast
transaction occurs.
If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognised in equity is transferred to net
profit or loss for the year.
For all other cash flow hedges, the gains or losses that are
recognised in equity are transferred to the income statement
in the same year in which the hedged firm commitment affects
the net profit and loss, for example when the future sale
actually occurs.
When the hedged firm commitment results in the recognition
of an asset or a liability, then, at the time the asset or liability
is recognised, the associated gains or losses that had
previously been recognised in equity are included in the initial
measurement of the acquisition cost or other carrying amount
of the asset or liability.
Derivatives that do not qualify for hedge accounting
Where derivatives do not qualify for hedge accounting, gains
or losses arising from changes in their fair value are taken directly
to net profit or loss for the year.
CONTRIBUTED EQUITY
Ordinary shares including share premium are classified as
contributed equity. No gain or loss is recognised in the income
statement on the purchase, sale, issue or cancellation of
Brambles’ own equity instruments.
Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction from the proceeds
of issue.
EARNINGS PER SHARE (EPS)
Basic EPS is calculated as net profit attributable to members of
the parent entities, adjusted to exclude costs of servicing equity
(other than dividends), divided by the weighted average number
of ordinary shares, adjusted for any bonus element.
Diluted EPS is calculated as net profit attributable to members
of the parent entities, adjusted for:
• Costs of servicing equity (other than dividends) and
preference share dividends;
• The after-tax effect of dividends and finance costs associated
with dilutive potential ordinary shares that have been
recognised as expenses;
• Other non-discretionary changes in revenues or expenses
during the year that would result from the dilution of potential
ordinary shares;
and divided by the weighted average number of ordinary shares and
dilutive potential ordinary shares, adjusted for any bonus element.