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116
MARKS AND SPENCER GROUP PLC
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
21 FINANCIAL INSTRUMENTS CONTINUED
O setting of fi nancial assets and liabilities
The following tables set out the fi nancial assets and fi nancial liabilities which are subject to o setting, enforceable master netting
arrangements and similar agreements. Amounts which are set o against fi nancial assets and liabilities in the Group’s balance sheet are
set out below. For trade and other receivables and trade and other payables, amounts not o set in the Statement of Financial Position
but which could be o set under certain circumstances are also set out.
Gross fi nancial
assets/(liabilities)
£m
Gross fi nancial
(liabilities)/assets
set o
£m
Net fi nancial
assets/(liabilities)
per statement of
fi nancial position
£m
Related amounts
not set o in the
statement of
fi nancial position
£m
Net
£m
At 2 April 2016
Trade and other receivables 31.6 (29.5) 2.1 – 2.1
Derivative fi nancial assets 146.1 – 146.1 (28.7) 117.4
Cash and cash equivalents 39.3(39.3)–––
217.0 (68.8) 148.2 (28.7) 119.5
Trade and other payables (259.3) 29.5 (229.8) – (229.8)
Derivative fi nancial liabilities (28.7) – (28.7) 28.7 –
Bank loans and overdrafts (90.8) 39.3 (51.5) – (51.5)
(378.8) 68.8 (310.0) 28.7 (281.3)
Gross fi nancial
assets/(liabilities)
£m
Gross fi nancial
(liabilities)/assets
set o
£m
Net fi nancial
assets/(liabilities)
per statement of
fi nancial position
£m
Related amounts
not set o in the
statement of
fi nancial position
£m
Net
£m
At 28 March 2015
Trade and other receivables 37.0 (37.0) – – –
Derivative fi nancial assets 170.0 – 170.0 (27.7) 142.3
Cash and cash equivalents 45.0 (42.1) 2.9 – 2.9
252.0 (79.1) 172.9 (27.7) 145.2
Trade and other payables (295.0) 37.0 (258.0) – (258.0)
Derivative fi nancial liabilities (27.7) – (27.7) 27.7 –
Bank loans and overdrafts (60.3) 42.1 (18.2) – (18.2)
(383.0) 79.1 (303.9) 27.7 (276.2)
The gross fi nancial assets and liabilities set o in the Statement of Financial Position primarily relate to cash pooling arrangements with
banks. Amounts which do not meet the criteria for o setting on the Statement of Financial Position but could be settled net in certain
circumstances principally relate to derivative transactions under ISDA (International Swaps and Derivatives Association) agreements
where each party has the option to settle amounts on a net basis in the event of default of the other party.
Fair Value Hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of fi nancial instruments by valuation technique:
> Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities;
> Level 2: not traded in an active market but the fair values are based on quoted market prices or alternative pricing sources with reasonable
levels of price transparency. The Group’s Level 2 fi nancial instruments include interest rate and foreign exchange derivatives. Fair value is
calculated using discounted cash fl ow methodology, future cash fl ows are estimated based on forward exchange rates and interest rates
(from observable market curves) and contract rates, discounted at a rate that refl ects the credit risk of the various counterparties for
those with a long maturity; and
> Level 3: techniques which use inputs which have a signifi cant e ect on the recorded fair value that are not based on observable market
data. At 28 March 2015 the fair value of the embedded derivative was calculated using an option valuation model based on the present
value of a 35 year lease with annual lease payments increasing by Retail Price Index (RPI), capped and fl oored at 1.5% and 2.5% respectively
and then discounted back to the valuation date. The valuation was sensitive to changes in RPI. As a result of the acquisition of Lima
(Bradford) S.à r.l. in the period, the host contract that contained the embedded derivative is now held between Group companies.
As such, the Group no longer holds any third party Level 3 assets or liabilities.