Air New Zealand 2016 Annual Report Download - page 34

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Notes to the Financial Statements (continued)
As at 30 June 2016
32
AIR NEW ZEAL AND ANNUAL FINANCIAL RESULTS 2016
24. Financial Risk Management (continued)
The effective portion of changes in the fair value of foreign currency hedging instruments which were deferred to the cash flow hedge reserve
(within hedge reserves) during the year are set out below, together with transfers to either earnings or the asset carrying value, as appropriate,
when the underlying hedged item occurs.
2016
$M
2015
$M
Recognised in Statement of Changes in Equity
Hedge reserves
Balance at the beginning of the year
Change in fair value*
Transfers to foreign exchange gains
Transfers to asset carrying value
Taxation on reserve movements
94
(57)
(114 )
-
47
50
174
(89)
(26)
(15)
Balance at the end of the year
Represented by:
Forecast operating revenue/expense
Tax effect
(30)
(40)
10
94
131
(37)
Balance at the end of the year (30) 94
* The change in fair value of the hedging instrument is that used for the purpose of assessing hedge effectiveness. No ineffectiveness arose on
cash flow hedges of foreign currency transactions during the year (30 June 2015: Nil). Forward points excluded from the hedge designation of
$14 million were recognised in ‘Finance costs’ during the year (30 June 2015: $24 million).
The weighted average contract rates of hedge accounted foreign currency derivatives outstanding as at reporting date are set out below:
2016 2015
USD
AUD
EUR
JPY
GBP
0.6658
0.9139
0.6025
76.41
0.4572
0.7896
0.9396
0.6562
89.68
0.4997
NET INVESTMENT HEDGE
Investments designated in a net investment hedge are included within ‘Investments in other entities’ on the Statement of Financial Position.
The hedging instrument is included within ‘Interest-bearing liabilities’.
2016
NZ$M
2015
NZ$M
Hedged amount of United States Dollar investment
Hedged by: United States Dollar interest-bearing liabilities
62
(62)
55
(55)
The effective portion of changes in fair value of both the hedged item and the hedging instrument are recognised in the foreign currency
translation reserve, as set out below.
Foreign currency translation reserve
Balance at the beginning of the year
Translation (losses)/gains on hedged investment**
Translation gains/(losses) on hedging instrument**
Translation (losses)/gains on unhedged investments
Transfers upon disposal of subsidiaries to ‘Other expenses’
Cessation of equity accounting
Taxation on reserve movements
4
(2)
2
(13)
-
(6)
-
(23)
12
(12)
19
5
-
3
Balance at the end of the year (15) 4
** Translation gains/losses are those used for the purpose of assessing hedge effectiveness. No ineffectiveness arose on net investment hedges
during the year (30 June 2015: Nil).