Holiday Inn 2008 Annual Report Download - page 84

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82 IHG Annual Report and Financial Statements 2008
22 Financial instruments continued
Interest rate risk continued
Repricing analysis
Effective Total Between
interest carrying Less than 6 months Between 1 and More than
rate amount 6 months and 1 year 2 years 5 years
%$m$m$m$m$m
31 December 2007
Cash and cash equivalents 0.0-5.9 (105) (105) – – –
Secured bank loans 8.277–––
Finance lease obligations* 9.7200–––200
Unsecured bank loans:
Euro floating rate 5.3 243 243 – – –
– effect of euro interest rate swaps* (0.6) – (111) – 111 –
US dollar floating rate 5.5 670 670 – – –
– effect of US dollar interest rate swaps* (0.4) – (100) 100 – –
Sterling floating rate 6.9 553 553 – – –
– effect of sterling interest rate swaps* 0.0 – (151) – 151 –
HK dollar floating rate 4.5 91 91 – – –
Net debt 1,659 1,097 100 262 200
* These items bear interest at a fixed rate.
Interest rate swaps are included in the above tables to the extent that they affect the Group’s interest rate repricing risk. The swaps hedge
the floating rate debt by fixing the interest rate. The effect shown above is their impact on the debt’s floating rate, for an amount equal to
their notional principal (principal and maturity of swap is shown in the repricing analysis). The fair values of derivatives are recorded in
other financial assets and other payables.
Trade and other receivables and trade and other payables are not included above as they are not interest bearing.
Fair values
The table below compares carrying amounts and fair values of the Group’s financial assets and liabilities.
2008 2007
Carrying Carrying
value Fair value value Fair value
Note $m $m $m $m
Financial assets
Equity securities available-for-sale 15 70 70 93 93
Loans and receivables:
Cash and cash equivalents 18 82 82 105 105
Other financial assets 15 92 92 113 113
Trade and other receivables, excluding prepayments 17 367 367 421 421
Financial liabilities
Borrowings, excluding finance lease obligations 20 (1,153) (1,153) (1,564) (1,564)
Finance lease obligations 20 (202) (168) (200) (250)
Trade and other payables, excluding derivatives 19 (1,128) (1,128) (1,060) (1,060)
Derivatives 19 (10) (10) (3) (3)
The fair value of cash and cash equivalents approximates book value due to the short maturity of the investments and deposits. Equity
securities available-for-sale and derivatives are held on the balance sheet at fair value as set out in note 15. The fair value of other financial
assets approximates book value based on prevailing market rates. The fair value of borrowings, excluding finance lease obligations,
approximates book value as interest rates reset to market rates on a frequent basis. The fair value of the finance lease obligation is
calculated by discounting future cash flows at prevailing interest rates. The fair value of trade and other receivables and trade and other
payables approximates to their carrying value, including the future redemption liability of the Group’s loyalty programme.
Notes to the Group financial statements continued