BT 2003 Annual Report Download - page 126

36. Financial instruments and risk management continued
Currency exposures
The table below shows the currency exposures of the group’s net monetary assets (liabilities), in terms of those
transactional exposures that give rise to net currency gains and losses recognised in the profit and loss account.
Such exposures comprise the monetary assets and monetary liabilities of the group that are not denominated in
the operating (or ‘‘functional’’) currency of the operating unit involved, other than certain non-sterling borrowings
treated as hedges of net investments in non-UK operations. At 31 March, these exposures were as follows:
2003 2002
Sterling
£m
US dollar
£m
Euro
£m
Other
£m
Total
£m
Sterling
£m
US dollar
£m
Euro
£m
Other
£m
Total
£m
Functional currency of
group operation:
Sterling –––11–1(1) – –
Euro 3 (6) – – (3) 27 (42) – 8 (7)
Other 13––4–––––
Total 4 (3) – 1 2 27 (41) (1) 8 (7)
The amounts shown in the table above take into account the effect of any currency swaps, forward contracts and
other derivatives entered into to manage those currency exposures.
At 31 March 2003, the group also held various forward currency contracts that the group had taken out to
hedge expected future foreign currency purchases and sales.
Fair values of financial assets held for trading 2003
£m
2002
£m
Net gain included in profit and loss account 34 50
Fair value of financial assets held for trading at 31 March 2,610 1,510
The net gain was derived from government bonds, commercial paper and similar debt instruments. The average
fair value of financial assets held during the year ended 31 March 2003 did not differ materially from the year
end position.
Hedges
Gains and losses on instruments used for hedging are not recognised until the exposure that is being hedged
is itself recognised. Unrecognised and deferred gains and losses on instruments used for hedging and those
recognised in the years ended 31 March 2003 and 31 March 2002 are as follows:
2003 2002
Gains
£m
Losses
£m
Gains
£m
Losses
£m
Gains and losses:
recognised in the year but arising in previous years
a
16 27 27 7
unrecognised at the balance sheet date 1,088 878 99 772
carried forward in the year end balance sheet, pending recognition in the
profit and loss account
a
140 128 71 73
expected to be recognised in the following year:
unrecognised at balance sheet date 16 1 22 61
carried forward in the year end balance sheet, pending recognition in
the profit and loss account
a
104 106 16 27
a
Excluding gains and losses on hedges accounted for by adjusting the carrying amount of a fixed asset.
During the year ended 31 March 2003, the group entered into two derivatives contracts as an investment in a
UK listed equity, with limited net overall exposure. At 31 March 2003, the two contracts had a net value of £nil,
consisting of a futures purchase contract with a fair value of £68 million and a futures sales contract with a fair
value of £68 million.
Unused committed lines of credit
Unused committed lines of credit for short-term financing available at 31 March 2003 totalled approximately
£575 million (2002 – £2,100 million), which was in support of a commercial paper programme or other
borrowings. These lines of credit are available for up to one year.
Notes to the financial statements
BT Annual Report and Form 20-F 2003 125