Tesco 2015 Annual Report Download - page 122

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Note 21 Financial instruments continued
Offsetting of financial assets and liabilities
The following tables show those financial assets and liabilities subject to offsetting, enforceable master netting arrangements and similar agreements.
At 28 February 2015
Financial assets offset
Gross
amounts of
recognised
financial
assets/
(liabilities)
£m
Gross
amounts of
financial
assets/
(liabilities) set
off in the
Group
Balance Sheet
£m
Net amounts
presented in
the Group
Balance
Sheet
£m
Related amounts not set off
in the Group Balance Sheet
Net amount
£m
Financial
instruments
£m
Collateral
£m
Cash and cash equivalents 2,405 (240) 2,165 – – 2,165
Derivative financial instruments 1,699 –1,699 (331) (2) 1,366
Trade and other receivables 2,490 (369) 2,121 – – 2,121
Total 6,594 (609) 5,985 ( 331) (2) 5,652
Financial liabilities offset
Bank loans and overdrafts (2,222) 240 (1,982) – – (1,982)
Repurchases, securities lending and similar agreements*(97) –(97) 103 – 6
Derivative financial instruments (1,035) –(1,035) 331 61 (643)
Trade and other payables (10,291) 369 (9,922) – – (9,922)
Total (13,645) 609 (13,036) 434 61 (12,541)
* Repurchases, securities lending and similar agreements are included within the deposits from banks balance of £106m (Note 23).
At 22 February 2014
Financial assets offset
Gross
amounts of
recognised
financial
assets/
(liabilities)
£m
Gross
amounts of
financial
assets/
(liabilities) set
off in the
Group Balance
Sheet
£m
Net amounts
presented in
the Group
Balance
Sheet
£m
Related amounts not set off
in the Group Balance Sheet
Net amount
£m
Financial
instruments
£m
Collateral
£m
Cash and cash equivalents 2,882 (376) 2,506 – – 2,506
Derivative financial instruments 1,576 –1,576 (336) (6) 1,234
Trade and other receivables 2,737 (547) 2,190 – – 2,190
Total 7,195 (923) 6,272 (336) (6) 5,930
Financial liabilities offset
Bank loans and overdrafts (1,206) 376 (830) – – (830)
Repurchases, securities lending and similar agreements*(765) –(765) 765 – –
Derivative financial instruments (869) –(869) 336 16 (517 )
Trade and other payables (11,142) 547 (10,595) – – (10,595)
Total (13,982) 923 (13,059) 1,101 16 (11,942)
* Repurchases, securities lending and similar agreements are included within the deposits from banks balance of £780m (Note 23).
For the financial assets and liabilities subject to enforceable master netting arrangements above, each agreement between the Group and the counterparty
allows for net settlement of the relevant financial assets and liabilities when both elect to settle on a net basis. In the absence of such an election, financial
assets and liabilities will be settled on a gross basis, however each party to the master netting agreement or similar agreements will have the option to settle
all such amounts on a net basis in the event of default of the other party.
Note 22 Financial risk factors
The main financial risks faced by the Group relate to fluctuations in interest and foreign exchange rates, the risk of default by counterparties to financial
transactions and the availability of funds to meet business needs. The management of these risks is set out below.
Risk management is carried out by a central treasury department under policies approved by the Board of Directors. The Board provides written principles
for risk management, as described in the Principal risks and uncertainties on pages 22 to 25.
Interest rate risk
Interest rate risk arises from long-term borrowings. Debt issued at variable rates as well as cash deposits and short-term investments exposes the Groupto cash
flow interest rate risk. Debt issued at fixed rates exposes the Group to fair value risk. The Group’s interest rate management policy is explained onpage 25.
The Group has Retail Price Index (‘RPI’) debt where the principal is indexed to increases in the RPI. RPI debt is treated as floating rate debt. The Group also
has Limited Price lnflation (‘LPI’) debt, where the principal is indexed to RPI, with an annual maximum increase of 5% and a minimum of0%. LPI debt is
treated as fixed rate debt.
For interest rate risk relating to Tesco Bank, refer to the separate section on Tesco Bank financial risk factors on page 123.
120 Tesco PLC Annual Report and Financial Statements 2015
Notes to the Group financial statements continued