Osim FR 050407.indd

Notes to the Financial Statements - 31 December 2006 (cont’d)43. Financial instruments (cont’d)d) Derivative financial instruments and hedging activitiesDerivative fi nancial instruments included in the balance sheets at 31 December are as follows:2006 2005Group Assets Liabilities Assets Liabilities$’000 $’000 $’000 $’000Forward currency contracts* – 1,716 – 4,553Interest rate swaps* 910 – 738 –910 1,716 738 4,553* The above forward currency contracts and interest rate swaps are entered into for hedging purposes and hedge accountingis applied except for the interest rate swaps because strict effectiveness criteria are not being met.i) Cash flow hedgesHedge of highly probable forecasted sales and purchasesAs at 31 December 2006, the Group held forward currency contracts designated as hedges of the currency riskrelated to highly probable forecasted purchases (2005: forecasted sales and purchases), which are expected tomaterialise in the twelve months following the balance sheet date.The terms of the forward currency contracts have been negotiated to match the terms of the forecastedtransactions.Certain of these derivatives were assessed to be ineffective as at 31 December 2005, and accordingly their underlyingunrealised gain of $48,000 was recognised in the profi t and loss account for the year.The revaluation of derivatives assessed to be highly effective hedging instruments resulted in a net unrealised loss of$1,394,000 (2005: $3,236,000), which was included in the hedging reserve (Note 6).Notes to the Financial Statements 167Annual Report 2006