Annual Report and Accounts 2006 - DCC plc

90notes to the financial statements28. Derivative financial instrumentsAs at 31 March 2006Group Assets Liabilities Net€’000 €’000 €’000Interest rate swaps - fair value hedges 926 (9,167) (8,241)Interest rate swaps - not designated as hedges 6,805 (6,921) (116)Currency swaps - not designated as hedges 1,258 (3,786) (2,528)Cross currency interest rate swaps - fair value hedges - (7,203) (7,203)Forward foreign exchange contracts - cash flow hedges 2 (24) (22)Forward foreign exchange contracts - not designated as hedges 69 (21) 48Commodity price forward contracts - cash flow hedges 45 - 45Commodity price forward contracts - not designated as hedges 28 (28) -Total 9,133 (27,150) (18,017)Less non–current portionInterest rate swaps - fair value hedges 926 (9,167) (8,241)Interest rate swaps - not designated as hedges 6,805 (6,921) (116)Currency swaps - not designated as hedges 1,258 (3,786) (2,528)Cross currency interest rate swaps - fair value hedges - (7,203) (7,203)8,989 (27,077) (18,088)Current portion 144 (73) 71The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedgeditem is more than twelve months and as a current asset or liability if the maturity of the hedged item is less than twelve months.Interest rate swapsThe notional principal amounts of the outstanding interest rate swap contracts designated as fair value hedges underIAS 39 at 31 March 2006 total €210.149 million. At 31 March 2006, the fixed interest rates vary from 5.12% to 5.76%and the floating rates are based on US$ LIBOR and sterling LIBOR.The Group also utilises interest rate swaps, not designated as fair value hedges under IAS 39, to swap floating rate sterlingassets and liabilities into fixed rate sterling assets (8.05%) and fixed rate sterling liabilities (8.1%). The notional principalamounts of these swaps (Stg£61.000 million) offset.Currency swapsThe Group utilises currency swaps in conjunction with interest rate swaps designated as fair value hedges (as notedabove) to swap fixed rate US$ denominated debt into floating rate euro debt. The currency swaps (which swap floatingUS$ denominated debt based on US$ LIBOR into floating euro denominated debt based on EURIBOR) have notionalprincipal amounts of €167.113 million and are not designated as hedges under IAS 39.Cross currency interest rate swapsThe Group utilises cross currency interest rate swaps to swap fixed rate (7.82%) US$ denominated debt of US$100.000million into floating rate sterling debt of Stg£65.000 million. These swaps are designated as fair value hedges under IAS 39.Forward foreign exchange contractsThe notional principal amounts of outstanding forward foreign exchange contracts at 31 March 2006 total €17.638 million.Gains and losses recognised in the cash flow hedge reserve in equity (note 38) at 31 March 2006 on forward foreignexchange contracts designated as cash flow hedges under IAS 39 will be released to the Income Statement at variousdates up to four months after the balance sheet date.Commodity price forward contractsThe notional principal amounts of outstanding forward commodity contracts at 31 March 2006 total €2.654 million. The gainrecognised in the cash flow hedge reserve in equity (note 38) on forward commodity contracts designated as cash flow hedgesunder IAS 39 will be released to the Income Statement at various dates up to two months after the balance sheet date.Adoption of IAS 32 and IAS 39The Group adopted IAS 32 and IAS 39 from 1 April 2005. Derivative balances at 31 March 2005 were, in accordance withIrish GAAP, disclosed rather than recognised in the financial statements for the year then ended. The fair value loss onderivatives at 31 March 2005 amounted to €29.974 million with €29.816 million of this balance relating to derivativesassociated with the Group’s Unsecured Notes due 2008 to 2016. Under Irish GAAP at 31 March 2006, the Group’sUnsecured Notes due 2008 to 2016 were carried at cost of €305.094 million, not recognising fair value gains (note 29). Themovement in the Group’s net debt balance during the financial year, including the adoption of IAS 32 and IAS 39, is includedin note 30.