Marks and Spencer 2011 Annual Report Download - page 103

Download and view the complete annual report

Please find page 103 of the 2011 Marks and Spencer annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 116

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116

Strategy Performance & Marketplace Operating review Financial review Governance
Financial statements
& other information
To find out more visit marksandspencer.com/annualreport2011
101
Financial statements
23 Financial instruments continued
Sensitivity analysis
The table below illustrates the estimated impact on the income statement and equity as a result of market movements in foreign
exchange and interest rates in relation to all of the Group’s financial instruments. The Group considers that a 2% +/– movement in
interest rates and a 20% weakening or strengthening in sterling represent reasonable possible changes. However, this analysis is for
illustrative purposes only.
The impact in the income statement due to changes in interest rates reflects the effect on the Group’s floating rate debt as at the
balance sheet date. The impact in equity reflects the fair value movement in relation to the Group’s cross currency swaps.
The impact in the income statement from foreign exchange movements reflects the change in the fair value of the Group’s transactional
foreign exchange cash flow hedges and the net investment hedges at the balance sheet date. The equity impact shown for foreign
exchange sensitivity relates to derivative and non-derivative financial instruments hedging net investments. This value is expected to
be fully offset by the retranslation of the hedged foreign currency net assets leaving a net equity impact of zero.
The table excludes financial instruments that expose the Group to interest rate and foreign exchange risk where such risk is fully hedged
with another financial instrument. Also excluded are trade receivables and payables as these are either sterling denominated or the
foreign exchange risk is hedged.
2% decrease
in interest
rates
£m
2% increase
in interest
rates
£m
20%
weakening
in sterling
£m
20%
strengthening
in sterling
£m
At 3 April 2010
Impact on income statement: gain/(loss) 2.5 (8.3) (15.9) 10.6
Impact on other comprehensive income: gain/(loss) 33.0 (24.7) 29.2 (19.5)
At 2 April 2011
Impact on income statement: gain/(loss) 0.5 2.2 (2.8) 2.4
Impact on other comprehensive income: (loss)/gain (6.7) 6.4 44.3 (29.5)
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
–Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
–Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or
indirectly; and
–Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable
market data. Unlisted equity investments are included in Level 3. The fair value of embedded derivatives is determined using the
present value of the estimated future cash flows based on financial forecasts. The nature of the valuation techniques and the
judgement around the inputs mean that a change in assumptions could result in significant change in the fair value of the instrument.
As at , the Group held the following financial instruments measured at fair value:
2011 2010
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Assets measured at fair value
Financial assets at fair value through profit and loss
– Trading derivatives – 15.6 – 15.6 – 18.0 – 18.0
Derivatives used for hedging – 4.3 – 4.3 – 163.0 – 163.0
Embedded derivatives (note 5) – – 20.3 20.3
Available-for-sale financial assets
– equity securities – – 3.0 3.0 – – 3.0 3.0
Liabilities measured at fair value
Financial liabilities at fair value through profit and loss
– Trading derivatives – (18.1) – (18.1) – (19.6) – (19.6)
Derivative used for hedging – (70.1) – (70.1) – (7.5) – (7.5)
Put option over non-controlling interest ––
(
14.6
)
(
14.6
)
– – (63.5) (63.5)
There were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value
measurements in the current or prior years.
the end of the reporting period