2012 Annual Report - Domino's Pizza

NOTES TO THE FINANCIAL STATEMENTS CONTINUED
The following table details the notional principal amounts and remaining terms of the interest rate swap contracts outstanding as at reporting date:
Cash flow hedges
Outstanding floating
for fixed contract
AVERAGE CONTRACTED
FIXED INTEREST RATE
2012
%
2011
%
NOTIONAL PRINCIPAL AMOUNT
(i)
2012
$’000
2011
$’000
2012
$’000
FAIR VALUE
Consolidated
Less than 1 year n/a 5.22 - 15,035 - (137)
2011
$’000
2 to 5 years n/a 5.22 - - - -
- 15,035 - (137)
(i) The principal is a Euro denominated amount.
The interest rate swap settled on a monthly basis, with the Consolidated entity settling the difference between the floating and fixed interest rate on a net
basis. On 30 November 2011, the interest rate swap in relation to the Euro loan expired.
32.8 Credit risk management
Credit risk refers to the risk that a franchisee or business partner will default on its contractual obligations resulting in financial loss to the Group. The
Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating
the risk of financial loss from defaults. Credit exposure is controlled by limits that are continually reviewed.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by
international credit rating agencies.
Except as detailed in the following table, the carrying amount of financial assets recorded in the financial statements, net of any allowances for losses,
represents the Group’s maximum exposure to credit risk without taking account of the value of any collateral obtained:
32.8.1 Financial assets and other credit exposures
MAXIMUM CREDIT RISK
Consolidated
Guarantee provided under deed of guarantee 10,740 18,258
The Group provides guarantees to third party financiers in order to enable internal candidates (i.e. franchisees and managers) to fund the purchase of
DPE stores. The Group’s policy in this regard is to predominantly support internal candidates who have displayed strong operational expertise. Further, the
Group generally provides guarantees to internal candidates in the metropolitan markets where it has operated or is operating corporate stores.
In the event that a loan defaults, the Group’s policy is to purchase and operate the failed store as a corporate store.
2012
$’000
2011
$’000
70
ANNUAL REPORT 2012 DOMINO’S PIZZA ENTERPRISES LIMITED