NOTE 32. DERIVATIVES
A. DERIVATIVES FOR WHICH HEDGE ACCOUNTING IS APPLIED
I. Net investment hedges
The foreign currency exposures arising on translation of net investments in foreign operations are hedged using forward exchange
contracts and the designation of certain foreign currency borrowings as hedging instruments. The fair value is determined using
observable inputs (level 2 in the fair value hierarchy).
Each of the hedging relationships has been broadly effective throughout the current financial year or since inception with the small
amount of ineffectiveness recognised in profit or loss.
II. Reporting date positions
The notional amount and fair value of derivative financial instruments, together with a maturity profile, are provided below:
CONSOLIDATED
2015
2014
Maturity profile
Notional
contract
amount
Fair value
asset
Fair value
liability
Notional
contract
amount
Fair value
asset
Fair value
liability
Within
1 year
$m
1 to 5
years
$m
Over 5
years
$m $m
$m
$m
$m
$m
$m
a. NET INVESTMENT HEDGES
Forward foreign exchange
contracts
1,643
-
-
1,643
97
(4)
1,304
9
(6)
B. DERIVATIVES FOR WHICH HEDGE ACCOUNTING IS NOT APPLIED (DERIVATIVES HELD FOR ECONOMIC HEDGING PURPOSES
ONLY)
The fair value of the options, bond futures and share price index futures are measured using a quoted price in an active market (level
1 in the fair value hierarchy), whilst the fair value of the interest rate swaps and forward foreign exchange contracts are determined
using observable inputs (level 2 in the fair value hierarchy).
I. Reporting date positions
The notional amount and fair value of derivative financial instruments, together with a maturity profile, are provided below:
CONSOLIDATED
2015
2014
Maturity profile
Notional
contract
amount
Fair value
asset
Fair value
liability
Notional
contract
amount
Fair value
asset
Fair value
liability
Within
1 year
$m
1 to 5
years
$m
Over 5
years
$m $m
$m
$m
$m
$m
$m
a. PRESENTED IN INVESTMENTS/TRADE AND OTHER PAYABLES (INVESTMENT RELATED DERIVATIVES)
Interest rate swaps
-
-
-
-
-
-
310
8
-
Options
-
-
-
-
-
-
(2)
-
-
Bond futures
4,548
-
-
4,548
-
-
3,415
-
(1)
Share price index futures
271
-
-
271
-
-
271
-
-
Forward foreign exchange
contracts
711
-
-
711
-
(10)
445
6
-
b. PRESENTED IN TRADE AND OTHER RECEIVABLES/PAYABLES (TREASURY RELATED DERIVATIVES)
Forward foreign exchange
contracts
1,356
-
-
1,356
11
(101)
302
7
-
Interest rate swaps
200
-
-
200
-
-
50
-
-
In addition to the derivatives described above, certain contracts entered into include embedded derivative features. Such embedded
derivatives are assessed at inception of the contract and, depending on their characteristics, are accounted for as separate derivative
financial instruments. The fair value of the embedded derivatives was nil as at 30 June 2015 (2014-nil).
94 IAG ANNUAL REPORT 2015
