Telstra 2007 Annual Report Download - page 258

Telstra Corporation Limited and controlled entities
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Notes to the Financial Statements (continued)
(c) Derivative financial instruments and hedging activities
(continued)
Hedges of net investments in foreign operations (continued)
Gains or losses on remeasurement of our derivative instruments
designated as hedges of foreign investment s are recognised in the
foreign currency translation reserve in equity to the ext ent they are
effective. The cumulative amount of the recognised gains or losses
included in equity are transferred to the income statement when the
foreign operation is sold.
Gains or losses on any portion of the hedge determined to be
ineffective are recognised in the income statement within other
expenses or other revenue. During the year there was no material
ineffectiveness attributable to our net investment hedges.
During the year net gains after tax of $30 million (2006: $35 million) on
our hedging instruments were taken directly to equity in the foreign
currency translation reserve in the consolidated balance sheet.
Refer to Table Q and Table S for the value of our derivatives designated
as hedges of net foreign investments.
In addition, included in the carrying value of ‘other loans’ and ‘bills of
exchange and commercial paper’ at 30 June 2007 are New Zealand
dollar denominated borrowings of $181 million (2006: $164 million)
and New Zealand dollar denominated commercial paper of $368
million (2006: $334 million). These were designated as a hedging
instrument of our net investment in TelstraClear. The loans are
included within non current financial liabilities and the commercial
paper is included within current financial liabilit ies. A foreign
exchange loss after tax of $36 million (2006: gain of $41 million) on
translation of these borrowings and commercial paper to Australian
dollars was recognised in equity in the foreign currency translat ion
reserve in the consolidated balance sheet.
Derivative hedging instruments
Details of our derivative hedging instruments as at balance dat e are
shown in Table Q, Table R and Table S below. The fair value of a
hedging derivative is classified as a non current asset or liability if the
remaining maturity of the hedged item is more than 12 months, and
as a current asset or liability if the remaining maturit y of the hedged
item is less than 12 months.
(i) Gains or losses recognised in the cash flow hedging reserve in
equity (refer note 22) on cross currency swap contracts as at 30 June
2007 will be continuously released to the income statement until the
underlying borrowings are repaid.
34. Financial and capital risk management (continued)
Table Q Telstra Group Telstra Entity
Assets
As at 30 June
Liabilities
As at 30 June
Assets
As at 30 June
Liabilities
As at 30 June
2007 2006 2007 2006 2007 2006 2007 2006
$m $m $m $m $m $m $m $m
Cross currency swaps
Current
Cross currency swaps - designated cash
flow hedges of offshore loans (i) . . . . -11 91 --11 91 -
Cross currency swaps - designated fair
value hedges of offshore loans . . . . . -974 --974 -
Cross currency swaps - designated
hedge of net foreign investment . . . . 38 --638 --6
38 20 165 638 20 165 6
Non current
Cross currency swaps - designated cash
flow hedges of offshore loans (i) . . . . -53 654 350 -53 654 350
Cross currency swaps - designated fair
value hedges of offshore loans . . . . . 10 169 397 259 10 169 397 259
Cross currency swaps - designated
hedge of net foreign investment . . . . 15 --315 --3
25 222 1,051 612 25 222 1,051 612