Experian 2010 Annual Report Download - page 103

101
Introduction 2 – 11
Business review 12 – 51
Governance 52 – 84
Financial statements 85 – 160
4. Signicant accounting policies (continued)
Exceptional items
The separate reporting of non-recurring exceptional items gives an indication of the Group’s underlying performance.
Exceptional items are those arising from the prot or loss on disposal of businesses, closure costs of major business units or
costs of signicant restructuring programmes. All other restructuring costs are charged against EBIT in the segments in which
they are incurred.
Operating cash ow
Operating cash ow is calculated as cash generated from operations adjusted for outows in respect of the purchase of
property, plant and equipment and other intangible assets and adding dividends from associates but excluding any cash
inows and outows in respect of exceptional items. It is dened as EBIT less changes in working capital, plus depreciation/
amortisation, less capital expenditure, less prot retained in associates.
Net debt
Net debt is calculated as total debt less cash and cash equivalents and other highly liquid bank deposits with original maturities
greater than three months. Total debt includes loans and borrowings (and the fair value of derivatives hedging loans and
borrowings), overdrafts and obligations under nance leases. Accrued interest is excluded from net debt.
5. Financial risk management
Financial risk factors
The Group’s activities expose it to a variety of nancial risks: market risk (including foreign exchange risk, interest rate risk
and price risk), credit risk and liquidity risk. The Group’s nancial risk management focuses on the unpredictability of nancial
markets and seeks to minimise potential adverse effects on the Group’s nancial performance. The Group seeks to reduce its
exposure to nancial risks and uses derivative nancial instruments to hedge certain risk exposures. The Group also ensures
surplus funds are managed and controlled in a prudent manner which will protect capital sums invested and ensure adequate
short-term liquidity, whilst maximising returns.
Market risk
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk from future commercial transactions, recognised
assets and liabilities and investments in, and loans between, undertakings with different functional currencies. In 2010, the
Group managed such risk, primarily within undertakings whose functional currencies are the US dollar, by borrowing in the
relevant foreign currencies and using forward foreign exchange contracts. The principal transaction exposures in 2010 were to
sterling and the euro. In 2009, the Group managed such risk primarily within undertakings whose functional currencies were
sterling and the principal transaction exposures were to the US dollar and the euro.
On the basis of the prole of foreign exchange transaction exposures, and an assessment of reasonable possible changes
in such exposures, the Group’s sensitivity to foreign exchange risk can be quantied as follows with all other variables held
constant:
Foreign exchange exposure 2010 2009
Sterling against US dollar:
Currency strengthening/weakening 10% 9%
Effect on prot for the year US$60m
higher/lower
US$nil
Effect on other comprehensive income and other components of equity US$nil US$nil
Euro against US dollar:
Currency strengthening/weakening 10% n/a
Effect on prot for the year US$7m
higher/lower
n/a
Effect on other comprehensive income and other components of equity US$nil n/a
Euro against sterling:
Currency strengthening/weakening n/a 8%
Effect on prot for the year n/a US$2m
higher/lower
Effect on other comprehensive income and other components of equity n/a US$nil