BT 2004 Annual Report Download - page 122

36. Financial instruments and risk management continued
Currency exposures
The table below shows the currency exposures of the group’s net monetary assets (liabilities), in terms of those
transactional exposures that give rise to net currency gains and losses recognised in the profit and loss account.
Such exposures comprise the monetary assets and monetary liabilities of the group that are not denominated in
the operating (or ‘‘functional’’) currency of the operating unit involved, other than certain non-sterling
borrowings treated as hedges of net investments in non-UK operations. At 31 March, these exposures were as
follows:
2004 2003
Sterling
£m
US dollar
£m
Euro
£m
Other
£m
Total
£m
Sterling
£m
US dollar
£m
Euro
£m
Other
£m
Total
£m
Functional currency of
group operation:
Sterling –43 7 151 –––11
Euro –2–243 (6) – – (3)
Other –––––13––4
Total –45 7 355 4 (3) – 1 2
The amounts shown in the table above take into account the effect of any currency swaps, forward contracts and
other derivatives entered into to manage those currency exposures.
At 31 March 2004, the group also held various forward currency contracts that the group had taken out to
hedge expected future foreign currency purchases and sales.
Fair values of financial assets held for trading 2004
£m
2003
£m
Net gain included in profit and loss account 61 34
Fair value of financial assets held for trading at 31 March 785 2,610
The net gain was derived from government bonds, commercial paper and similar debt instruments. The average
fair value of financial assets held during the year ended 31 March 2004 did not differ materially from the year
end position.
Hedges
Gains and losses on instruments used for hedging are not recognised until the exposure that is being hedged
is itself recognised. Unrecognised and deferred gains and losses on instruments used for hedging and those
recognised in the years ended 31 March 2004 and 31 March 2003 are as follows:
2004 2003
Gains
£m
Losses
£m
Gains
£m
Losses
£m
Gains and losses:
recognised in the year but arising in previous years
a
104 106 16 27
unrecognised at the balance sheet date 306 740 1,088 878
carried forward in the year end balance sheet, pending recognition in the
profit and loss account
a
564 122 140 128
expected to be recognised in the following year:
unrecognised at balance sheet date 9–16 1
carried forward in the year end balance sheet, pending recognition in
the profit and loss account
a
124 59 104 106
a
Excluding gains and losses on hedges accounted for by adjusting the carrying amount of a fixed asset.
During the year ended 31 March 2003, the group entered into two derivatives contracts as an investment in a
UK listed equity, with limited net overall exposure. At 31 March 2003, the two contracts had a net value of £nil,
consisting of a futures purchase contract with a fair value of £68 million and a futures sales contract with a fair
value of £68 million. These contracts were closed out in April 2003.
Unused committed lines of credit
Unused committed lines of credit for short-term financing available at 31 March 2004 totalled approximately
£145 million (2003 – £575 million), which was in support of a commercial paper programme or other
borrowings. These lines of credit are available for up to one year.
BT Annual Report and Form 20-F 2004121 Notes to the financial statements