Qantas 2013 Annual Report Download - page 160

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E FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
The different methods of estimating the fair value of nancial instruments have been dened as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
The fair value of nancial instruments, by valuation method, are summarised in the table below:
Qantas Group
2013
$M Level 1 Level 2 Level 3 Total
Derivative nancial assets – 207 – 207
Derivative nancial liabilities – (140) – (140)
Net nancial instruments measured at fair value – 67 – 67
2012
$M
Derivative nancial assets –105 –105
Derivative nancial liabilities – (593) – (593)
Net nancial instruments measured at fair value – (488) – (488)
Financial instruments that use valuation techniques with only market observable inputs to the overall valuation include interest rate
swaps, forward and option commodity contracts and foreign exchange contracts that are not traded on a recognised exchange.
F CAPITAL MANAGEMENT
The Board’s policy is to maintain a strong capital base designed to maximise shareholder value, maintain creditor condence and
sustain future development of the business. Qantas targets a capital structure consistent with an investment grade credit rating
while maintaining adequate liquidity.
The Board remains focused on balancing funding requirements of the business and investing for future growth with providing
dividends for shareholders. The Board is committed to the resumption of dividend payments. The quantum and timing of this will
depend on trading results, prevailing market conditions, the maintenance of an investment grade credit rating and the level of
capital expenditure commitments.
During the year ended 30 June 2013 the Qantas Group invested $1.3 billion (2012: $2.3 billion) in capital expenditure and maintained
an investment grade credit rating.
In the year ended 30 June 2014 the Qantas Group estimates it will spend $1.2 billion on net capital expenditure. The required funding
will be met primarily through operating cash ows, although further debt funding is planned within the objective of maintaining an
investment grade credit rating. The Board considers it prudent not to pay a dividend for the year ended 30 June 2013.
The Board monitors the level of returns relative to the assets employed in the business measured by the Group’s Return on Invested
Capital (ROIC). The target is for ROIC to exceed cost of capital over the long term while growing the business.
36. Events Subsequent to Balance Date
On 29 August 2013, Qantas announced the sale of its wholly owned subsidiary Qantas Defence Services (QDS) to Northrop Grumman
Australia, part of global aviation rm Northrop Grumman Corporation for a price of $80 million for the business and other related
assets, an amount in excess of the Group’s carrying value.
Other than as disclosed above, there has not arisen in the interval between 30 June 2013 and the date of this Report any other
event that would have had a material effect on the Financial Statements as at 30 June 2013.
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2013
35. Financial Risk Management
continue
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