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Notes to the Financial Statements (continued)
As at 30 June 2015
Air New Zealand Annual Financial Results 2015 33
23. Financial Risk Management (continued)
FAIR VALUE HEDGES
Underlying currency movements on aircraft designated in a fair value hedge are included within ‘Property, plant and equipment’ on the Statement of
Financial Position. The hedging instrument is included within ‘Interest-bearing liabilities’.
2015
NZ$M
2014
NZ$M
Underlying United States Dollar aircraft fair values
Hedged by: United States Dollar interest-bearing liabilities
944
(944)
353
(353)
The effective portion of changes in the fair value of both the hedged item and the hedging instrument are offset within ‘Foreign exchange
gains’ within the Statement of Financial Performance, as set out below:
Changes in fair value* on hedged item
Changes in fair value* on hedging instrument
176
(176)
(12)
12
- -
* The change in fair value is that used for the purpose of assessing hedge effectiveness. No ineffectiveness arose on fair value hedges during the
year (30 June 2014: Nil).
HEDGED, BUT NOT HEDGE ACCOUNTED
Where changes in the fair value of a derivative provide a natural offset to the underlying hedged item as it impacts earnings, hedge accounting is not
applied. The following items recognised within the line item shown in the Statement of Financial Position are denominated in a foreign currency and
give rise to foreign exchange risk.
2015
NZ$M
2014
NZ$M
Interest-bearing liabilities
Provisions
Interest-bearing assets
USD
USD
AUD
(556)
(242)
36
(501)
(165)
35
The following foreign currency derivatives were recognised within ‘Derivative financial instruments’ on the Statement of Financial Position as
at reporting date.
Hedging instruments
Derivative financial instruments
NZD
USD
AUD
OTHER
(662)
724
(37)
11
(561)
585
(42)
4
Not hedge accounted foreign currency derivatives 36 (14)
The changes in fair value of hedged items and hedging instruments during the year offset within ‘Foreign exchange gains’ within the
Statement of Financial Performance, as set out below:
Foreign currency gains/(losses) on:
Interest-bearing liabilities
Provisions
Interest-bearing assets
Derivative financial instruments
(120)
(46)
(2)
165
62
17
(1)
(77)
(3) 1
Sensitivity analysis
The sensitivity analyses which follow are hypothetical and should not be considered predictive of future performance. They only include financial
instruments (derivative and non-derivative) and do not include the future forecast hedged transactions or the underlying fair value of hedged non-
financial assets. As the sensitivities are only on financial instruments, the sensitivities ignore the offsetting impact on future forecast transactions
which many of the derivatives are hedging and the offsetting impact on underlying United States Dollar non-financial asset values, which are
hedged by debt instruments. Changes in fair value can generally not be extrapolated because the relationship of change in assumption to change
in fair value may not be linear. In addition, for the purposes of the below analyses, the effect of a variation in a particular assumption is calculated
independently of any change in another assumption. In reality, changes in one factor may contribute to changes in another, which may magnify or
counteract the sensitivities. Furthermore, sensitivities to specific events or circumstances will be counteracted as far as possible through strategic
management actions. The estimated fair values as disclosed should not be considered indicative of future earnings on these contracts.