Vodafone 2001 Annual Report Download - page 45

Vodafone Group Plc
Annual Report & Accounts
for the year ended
31 March 2001
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
17 Fin an cial in stru m ents continued
The following methods and assumptions were used to estimate the fair values shown in the previous table.
Fixed asset investments (excluding investments in joint ventures and associated undertakings) – The net book value of fixed asset
investments at 31 March 2001 comprises investments recorded at an original cost of £3,141m (2000 – £442m). An impairment loss of
£186m has been set against the Group’s investments in Globalstar and Shinsegi Telecom Inc. Investments include traded and untraded
equity investments in companies involved in providing telecommunications services. Listed investments are stated at fair value based
on their quoted share price at 31 March 2001. Fixed asset investments do not include any valuation in respect of existing customer
bases or other intangible assets.
Cash at bank and in hand and liquid investments – The carrying values of cash and liquid investments approximate to their fair
values because of the short term maturity of these instruments.
Current asset investments – The carrying values of current asset investments are recorded in the accounts at the estimated fair value
of the expected proceeds from disposal.
Borrowings (excluding foreign exchange contracts) – The carrying values of short term borrowings approximate to fair value because
of their short term maturity. The fair value of quoted long term borrowings is based on year end mid-market quoted prices. The fair
value of other borrowings is estimated by discounting the future cash flows to net present values using appropriate market interest
and foreign currency rates prevailing at the year end.
Foreign exchange contracts and interest rate swaps and futures – The Group enters into foreign exchange contracts, interest rate
swaps and futures in order to manage its foreign currency and interest rate exposure. The fair value of these financial instruments was
estimated by discounting the future cash flows to net present values using appropriate market interest and foreign currency rates
prevailing at the year end.
Hedges
The Group’s policy is to use derivative instruments to hedge against exposure to movements in interest rates and exchange rates.
Changes in the fair value of instruments used for hedging are not recognised in the financial statements until the hedged exposure is
itself recognised. Unrecognised gains and losses on instruments used for hedging are set out below:
Total net
Gains Losses gains/(losses)
£m £m £m
Unrecognised gains and losses on hedges at 1 April 2000 88 (97) (9)
Less: gains and losses arising in previous years that
were recognised in the year (86) 97 11
–––––– –––––– ––––––
Gains and losses arising before 1 April 2000 that were
not recognised at 31 March 2001 2 – 2
Gains and losses arising in the year that were
not recognised at 31 March 2001 4 (5) (1)
–––––– –––––– ––––––
Unrecognised gains and losses on hedges at 31 March 2001 6 (5) 1
–––––– –––––– ––––––
Of which:
Gains and losses expected to be recognised in 2001 6 (5) 1
Curren cy exposu res
Taking into account the effect of forward contracts and other derivative instruments, the Group did not have a material financial
exposure to foreign exchange gains or losses on monetary assets and monetary liabilities denominated in foreign currencies at
31 March 2001.
Further details regarding the Group’s Treasury Management and Policies are included in the Financial Review on pages 6 and 7.
Short-term debtors and creditors have been omitted from the analyses in notes 16 and 17.