EasyJet 2013 Annual Report Download - page 123

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Amounts recorded in the income statement in respect of revaluation of monetary assets and liabilities and the gains
and losses on derivatives designated as held for trading are as follows:

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2012
£ million
Unrealised revaluation (losses)/gains on non-derivative financial instruments  8
Realised foreign exchange (losses)/gains on non-derivative financial instruments  10
Unrealised revaluation gains on other monetary assets and liabilities  7
Unrealised gains/(losses) on derivative financial instruments  (16)
Realised losses on derivative financial instruments  (8)
Net (losses)/gains (note 2)  1
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easyJet is exposed to financial risks including fluctuations in exchange rates, jet fuel prices and interest rates. Financial risk
management aims to limit these market risks with selected derivative hedging instruments being used for this purpose.
easyJet policy is not to trade in derivatives but to use the instruments to hedge anticipated exposure. As such, easyJet is
not exposed to market risk by using derivatives as any gains and losses arising are offset by the outcome of the underlying
exposure being hedged. In addition to market risks, easyJet is exposed to credit and liquidity risk.
The Board is responsible for setting financial risk and capital management policies and objectives which are implemented
by the treasury function on a day to day basis. The policy outlines the approach to risk management and also states
the instruments and time periods which the treasury function is authorised to use in managing financial risks. The policy
is regularly reviewed to ensure best practice, however there have been no significant changes during the current year.
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Capital employed comprises shareholders’ equity, borrowings, cash and money market deposits (excluding restricted
cash) and an adjustment for the capital implicit in aircraft operating lease arrangements. The adjustment is calculated
by multiplying the annual charge for aircraft dry leasing by a factor of seven, in line with accepted practice for the
airline industry.
Normalised operating profit is adjusted for the implied interest incorporated in the charge for aircraft dry leasing.
Consequently, the capital employed at the end of the current and prior year and the return earned during those years
were as follows:

PLOOLRQ
2012
£ million
Shareholders’ equity  1,794
Borrowings  957
Cash and money market deposits (excluding restricted cash)  (883)
Reported capital employed  1,868
Operating leases adjustment  665
Capital employed including operating leases adjustment  2,533
Operating profit – reported  331
Implied interest in operating lease costs  32
Operating profit – adjusted  363
Operating profit after tax – adjusted  276
Return on capital employed  11.3%
The percentage of operating leased aircrafts at 30 September 2013 was 33% (2012: 26%). Board policy is to hold around
30% of the fleet under operating lease arrangements to provide an appropriate degree of flexibility in fleet size.
121
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