Cathay Pacific 2011 Annual Report Download - page 90

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Notes to the Accounts SUPPLEMENTARY INFORMATION
33. Financial risk management (continued)
(c) Market risk
(i) Foreign currency risk
The Group’s revenue streams are denominated in a number of foreign currencies resulting in exposure to
foreign exchange rate fluctuations. In this respect, it is assumed that the pegged rate between the Hong
Kong dollars and the United States dollars would be materially unaffected by any changes in movement in
value of the United States dollars against other currencies. The currencies giving rise to this risk in 2011
and 2010 are primarily US dollars, Euros, New Taiwan dollars, Australian dollars, Renminbi and Japanese
yen. Foreign currency risk is measured by employing sensitivity analysis, taking into account current and
anticipated exposures. To manage this exposure, assets are, where possible, financed in those foreign
currencies in which net operating surpluses are anticipated, thus establishing a natural hedge. In addition,
the Group uses currency derivatives to reduce anticipated foreign currency surpluses. The use of foreign
currency borrowings and currency derivatives to hedge future operating revenues is a key component of
the financial risk management process, as exchange differences realised on the repayment of financial
commitments are effectively matched by the change in value of the foreign currency earnings used to
make those repayments.
At the reporting date, the exposure to foreign currency risk was as follows:
2011
USD
HK$M
EUR
HK$M
TWD
HK$M
AUD
HK$M
RMB
HK$M
JPY
HK$M
Group
Trade debtors, other receivables
and prepayments 6,908 635 198 200 299 522
Liquid funds 12,663 40 93 67 2,290 612
Long-term loans (6,787) – – – – (1,350)
Obligations under finance leases (21,611) (3,034) – – – –
Trade creditors and other payables (6,019) (395) (92) (161) (487) (223)
Currency derivatives at notional value 26,913 (489) (4,338) (2,089) (5,039) (11,028)
Net exposure 12,067 (3,243) (4,139) (1,983) (2,937) (11,467)
2010
USD
HK$M
EUR
HK$M
TWD
HK$M
AUD
HK$M
RMB
HK$M
JPY
HK$M
Group
Trade debtors, other receivables
and prepayments 5,998 521 336 215 404 497
Liquid funds 17,832 264 75 14 2,444 249
Long-term loans (6,340) – – – – (1,429)
Obligations under finance leases (19,390) (3,253) – – – –
Trade creditors and other payables (3,225) (282) (81) (152) (564) (232)
Currency derivatives at notional value 36,285 (1,726) (6,072) (4,111) (10,449) (10,342)
Net exposure 31,160 (4,476) (5,742) (4,034) (8,165) (11,257)
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