Telstra 2012 Annual Report Download - page 156

Telstra Corporation Limited and controlled entities
126
Notes to the Financial Statements (continued)
d) Movements in net debt (continued)
The amount of $2,970 million is different to the carrying amount of
$2,698 million which is included in current borrowings (along with
promissory notes of $563 million and finance leases of $45 million)
in the statement of financial position. The carrying amount reflects
the amount of our borrowings due to mature within 12 months prior
to netting offsetting risk positions of associated derivative financial
instruments hedging these borrowings. The carrying amount
reflects a mixed measurement basis with part of the borrowing
portfolio recorded at fair value and the remaining part at amortised
cost which is compliant with the requirements under Australian
Accounting Standards.
(e) Interest and yields
The net interest on borrowings is shown in Table F below. Where
applicable, finance costs are assigned to categories on the basis of
the hedged item.
(i) The interest expense as shown in Table F above is categorised
based on the classification of financial instruments applicable as at
30 June.
(ii) Interest expense is a net amount after offsetting interest income
and interest expense on associated derivative instruments.
The year-on-year decrease in net interest on borrowings is due to a
reduction in the volume of average net debt and a reduction in the
average interest yield. The average yield on average net interest
bearing financial liabilities during the year was 7.0% (2011: 7.2%)
for the Telstra Group. The reduction in yield arises principally from
a reduction in short-term market base market rates in the current
year compared to the prior year, resulting in lower costs on the
floating rate debt component of our debt portfolio. The reduction in
short-term base rates was partially offset by an increase in
refinancing margins on term debt issued during the year.
Some early refinancing of our fiscal 2013 borrowing requirements
was undertaken in the second half of the current year resulting in
higher levels of liquidity. Higher liquidity contributes to higher
interest costs due to borrowing yields (to maintain higher liquidity)
exceeding investment yields.
17. Capital management and financial instruments (continued)
Table F Telstra Group
As at 30 June
2012 2011
Note $m $m
Interest on borrowings (i)
Financial instruments in hedge relationships
Domestic loans in cash flow hedges (ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 19
Offshore loans in cash flow hedges (ii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 481 545
Offshore loans in fair value hedges (ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 175
Promissory notes in fair value hedges (ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Derivatives and borrowings hedging net foreign investments . . . . . . . . . . . . . . . . . . . . . . . . . 31
Available for sale
Promissory notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Other financial instruments
Offshore loans not in a hedge relationship or de-designated from fair value hedge relationships (ii) . . . . . 191 194
Telstra bonds and domestic loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 225
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8
Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 12
71,132 1,186
Finance income on net debt
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 111 117
Net interest on net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,021 1,069