Telstra 2010 Annual Report Download - page 154

Telstra Corporation Limited and controlled entities
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Notes to the Financial Statements (continued)
(a) Risks and mitigation (continued)
Liquidity risk (continued)
Financing arrangements
We have promissory note facilities in place in the United States,
Europe, Australia and New Zealand under which we may nominally
issue up to $10,372 million (2009: $11,212 million). As at 30 June
2010, we had on issue $274 million (2009: $299 million) under
these facilities. As at 30 June 2010, our subsidiary CSL Limited had
a bank bill acceptance facility of $109 million (2009: $107 million)
of which $107 million was issued (2009: $105 million). These
facilities are not committed or underwritten and we have no
guaranteed access to the funds. Generally, given we retain
suitable ratings, our facilities are available unless we default on any
terms applicable under the relevant agreements or become
insolvent. During the current and prior years there were no
defaults or breaches on any of our facility agreements.
(b) Hedging strategies
We hold a number of different financial instruments to hedge risks
relating to underlying transactions. Our major exposure to interest
rate risk and foreign currency risk arises from our long term
borrowings. We also have translation currency risk associated with
our offshore investments and transactional currency exposures
such as purchases in foreign currencies.
We designate certain derivatives as either:
• hedges of the fair value of recognised liabilities (fair value
hedges);
• hedges of foreign currency risk associated with recognised
liabilities or highly probable forecast transactions (cash flow
hedges); or
• hedges of a net investment in a foreign operation.
The terms and conditions in relation to our derivative instruments
are similar to the terms and conditions of the underlying hedged
items to maximise hedge effectiveness.
Borrowings de-designated from fair value hedge relationships or
not in a designated hedge relationship
Our borrowings de-designated from fair value hedge relationships
or not in designated hedge relationships comprise:
• a number of offshore borrowings denominated in United States
dollar, Euro and British pounds sterling which were in fair value
hedges and were de-designated from the hedge relationship for
hedge accounting purposes;
• a long term Euro bond issue which is not in a designated hedge
relationship for hedge accounting purposes;
• some forward foreign currency contracts that are not in a
designated hedge relationship for hedge accounting purposes
used to economically hedge fair value movements for changes
in foreign exchange rates associated with trade creditors and
other liabilities denominated in a foreign currency.
All our financial liabilities de-designated or not in designated hedge
relationships are in effective economic relationships based on
contractual face value amounts and cash flows over the life of the
transaction.
All other hedge relationships met hedge effectiveness requirements
for hedge accounting purposes at the reporting date.
Refer to section (c) for details on our economic relationships. Refer
to note 7 for the impact on finance costs relating to borrowings de-
designated or not in hedge relationships.
Fair value hedges
We hold cross currency principal and interest rate swaps to mitigate
our exposure to changes in the fair value of foreign denominated
debt from fluctuations in foreign currency and interest rates. The
hedged items designated are a portion of our foreign currency
denominated borrowings. The changes in the fair values of the
hedged items resulting from movements in exchange rates and
interest rates are offset against the changes in the fair value of the
cross currency and interest rate swaps. The objective of this
hedging is to convert foreign currency borrowings to floating
Australian dollar borrowings.
18. Financial risk management (continued)
Table F Telstra Group
As at 30 June
2010 2009
$m $m
We have access to the following lines of credit:
Credit standby arrangements
Unsecured committed cash standby facilities which are subject to annual review . . . . . . . . . . . . . . . 382 438
Amount of credit unused . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382 438