National Grid 2014 Annual Report Download - page 116

14. Investments in joint ventures and associates
Investments in joint ventures and associates represents businesses we do not control, but instead exercise joint control or significant
influence.
A joint venture is an arrangement established to engage in economic activity, which the Company jointly controls with other parties and
has rights to the net assets of the arrangement. Anassociate is an entity that is neither a subsidiary nor a joint venture, but over which
the Company has significant influence.
2014
£m
2013
£m
Share of net assets at 1 April 371 341
Exchange adjustments (16) 9
Additions 414
Share of post-tax results for the year 28 18
Dividends received (38) (21)
Other movements 210
Share of net assets at 31 March 351 371
A list of principal joint ventures and associates including the name, proportion of ownership and principal activity is provided in note 32.
The joint ventures and associates have no significant contingent liabilities to which the Group is exposed, and the Group has no
significant contingent liabilities in relation to its interest in the joint ventures and associates.
Outstanding balances with joint ventures and associates are shown in note 28.
15. Derivative financial instruments
Derivatives are financial instruments that derive their value from the price of an underlying item such as interest rates, foreign exchange,
credit spreads, commodities, equity or other indices. In accordance with Board approved policies, derivatives are transacted to
manage our exposure to fluctuations in interest rate and foreign exchange rate on borrowings and other contractual cash flows.
Specifically, we use derivatives to manage these risks from our financing portfolio to optimise the overall cost of accessing the debt
capital markets. These derivatives are analysed below. We also use derivatives to manage our operational market risks from
commodities. The commodity derivative contracts are detailed in note 30 (e).
Derivative financial instruments are initially recognised at fair value and subsequently remeasured at fair value at each reporting date.
Changes in fair values are recorded in the period they arise, either in the income statement or other comprehensive income depending
on the applicable accounting standards. Where the fair value of a derivative is positive it is carried as a derivative asset, and where
negative as a derivative liability.
We calculate fair value of the financial derivatives by discounting all future cash flows using the market yield curve at the reporting date.
The market yield curve for each currency is obtained from external sources for interest and foreign exchange rates. In the absence of
sufficient market data, fair values would be based on the quoted market price of similar derivatives. Analysis of these derivatives and the
various methods used to calculate their respective fair values is detailed below and in note 30.
For each class of derivative instrument type the fair value amounts are as follows:
2014 2013
Assets
£m
Liabilities
£m
Total
£m
Assets
£m
Liabilities
£m
Total
£m
Interest rate swaps 861 (743) 118 1,282 (1,207) 75
Cross-currency interest rate swaps 1,025 (195) 830 900 (160) 740
Foreign exchange forward contracts 68 (12) 56 15 (63) (48)
Forward rate agreements ––––(5) (5)
Inflation linked swaps 16 (213) (197) 48 (246) (198)
Total 1,970 (1,163) 807 2,245 (1,681) 564
Notes to the consolidated
financial statements continued
114 National Grid Annual Report and Accounts 2013/14