Tesco 2012 Annual Report Download - page 131

STRATEGIC REVIEW PERFORMANCE REVIEW GOVERNANCE FINANCIAL STATEMENTS OVERVIEW
Note 22 Financial risk factors continued
The following is an analysis of the undiscounted contractual cash flows payable under financial liabilities and derivatives. The potential cash outflow of
£18.6bn is considered acceptable as it is offset by financial assets and trade receivables of £14.3bn (2011: £17.1bn offset by financial assets and trade
receivables of £13.2bn).
The undiscounted cash flows will differ from both the carrying values and fair value. Floating rate interest is estimated using the prevailing rate at the
balance sheet date. Cash flows in foreign currencies are translated using spot rates at the balance sheet date. For index-linked liabilities, inflation is
estimated at 3% for the life of the liability.
At 25 February 2012
Due
within
1 year
£m
Due
between
1 and 2
years
£m
Due
between
2 and 3
years
£m
Due
between
3 and 4
years
£m
Due
between
4 and 5
years
£m
Due
beyond
5 years
£m
Non-derivative financial liabilities
Bank and other borrowings (1,734) (867) (1,005) (5) (1,524) (6,124)
Interest payments on borrowings (557) (431) (395) (359) (359) (3,716)
Customer deposits – Tesco Bank (5,087) (249) (51) – – –
Deposits by banks – Tesco Bank (78) – – – – –
Finance leases (39) (17) (15) (13) (13) (222)
Trade and other payables (11,011) (105) (22) (35) (9) (52)
Derivative and other financial liabilities
Net settled derivative contracts – receipts 67 54 56 21 60 470
Net settled derivative contracts – payments (122) (80) (69) (61) (43) (342)
Gross settled derivative contracts – receipts 3,905 735 1,416 166 1,047 3,757
Gross settled derivative contracts – payments (3,900) (652) (1,328) (77) (935) (2,685)
Future purchases of non-controlling interests (3) – – – – –
Total (18,559) (1,612) (1,413) (363) (1,776) (8,914)
At 26 February 2011
Due
within
1 year
£m
Due
between
1 and 2
years
£m
Due
between
2 and 3
years
£m
Due
between
3 and 4
years
£m
Due
between
4 and 5
years
£m
Due
beyond
5 years
£m
Non-derivative financial liabilities
Bank and other borrowings (1,278) (1,587) (876) (622) – (6,647)
Interest payments on borrowings (518) (495) (395) (355) (326) (3,828)
Customer deposits – Tesco Bank (4,898) (173) (3) – – –
Deposits by banks – Tesco Bank (36) – – – – –
Finance leases (56) (36) (15) (15) (16) (205)
Trade and other payables (10,303) (84) (14) (7) (3) (73)
Derivative and other financial liabilities
Net settled derivative contracts – receipts 74 68 68 37 14 31
Net settled derivative contracts – payments (176) (109) (88) (76) (57) (697)
Gross settled derivative contracts – receipts 1,619 641 468 672 132 3,368
Gross settled derivative contracts – payments (1,404) (652) (341) (610) (60) (2,631)
Future purchases of non-controlling interests (85) (24) – – – –
Total (17,061) (2,451) (1,196) (976) (316) (10,682)
Foreign exchange risk
The Group is exposed to foreign exchange risk principally via:
 Transactional exposure arises from the cost of future purchases of goods for resale, where those purchases are denominated in a currency other than
the functional currency of the purchasing company. Transactional exposures that could significantly impact the Group Income Statement are hedged.
These exposures are hedged via forward foreign currency contracts which are designated as cash flow hedges. The notional and fair value of these
contracts is shown in Note 21.
 Net investment exposure arises from changes in the value of net investments denominated in currencies other than Pounds Sterling. The Group
hedges a part of its investments in its international subsidiaries via foreign currency transactions and borrowings in matching currencies which are
formally designated as net investment hedges.
 Loans to non-UK subsidiaries are hedged via foreign currency transactions and borrowings in matching currencies. These are not formally designated
as hedges as gains and losses on hedges and hedged loans will naturally offset.
Tesco PLC Annual Report and Financial Statements 2012 127