Airtel 2014 Annual Report Download - page 234

Notes to consolidated financial statements
Digital for all
Annual Report 2014-15
232
18. Derivative Financial Instruments
The Group uses foreign exchange option contracts, swap contracts, forward contracts and interest rate swaps to manage
some of its transaction exposures. These derivative instruments (except for certain interest rate swaps, refer below,
‘Hedging instruments’) are not designated as cash flow, fair value or net investment hedges and are entered into for periods
consistent with currency and interest exposures.
The details of derivative financial instruments are as follows:-
(` Millions)
Particulars As of
March 31, 2015
As of
March 31, 2014
Assets
Currency swaps, forward and option contracts 280 100
Interest rate swaps 5,598 277
Embedded derivatives 2,632 3,203
8,510 3,580
Liabilities
Currency swaps, forward and option contracts 381 861
Interest rate swaps 73 3,822
Embedded derivatives 338 727
792 5,410
Bifurcation of above derivative instruments into current and non current
Non-current derivative financial assets 7,303 2,761
Current derivative financial assets 1,207 819
Non-current derivative financial liabilities (164) (4,313)
Current derivative financial liabilities (628) (1,097)
7,718 (1,830)
Embedded derivative
The Group entered into agreements denominated/ determined
in foreign currencies. The value of these contracts changes
in response to the changes in specified foreign currencies.
Some of these contracts have embedded foreign currency
derivatives having economic characteristics and risks that
are not closely related to those of the host contracts. These
embedded foreign currency derivatives have been separated
and carried at fair value through profit or loss.
Hedging instruments
Beginning April 1, 2013, the Group has applied fair value
hedge accounting, and started designating certain interest
rate swaps (exchanging fixed rate of interest for floating rate
of interest) as a hedging instrument for hedging the risk of
change in fair value of the non-convertible bonds with respect
to changes in the USD LIBOR/ EURIBOR zero coupon curve.
The fair value of such interest rate swaps is net asset of
` 4,955 Mn and net liability of ` 3,592 Mn as of March 31,
2015 and March 31, 2014, respectively. The gain of ` 8,528 Mn
and loss of ` 3,041 Mn has been recognised on the interest
rate swaps and loss of ` 7,454 Mn and gain of ` 3,275 Mn has
been recognised on the non-convertible bonds on account
of changes in fair value with respect to the hedged risk
during the year ended March 31, 2015 and March 31, 2014,
respectively.