✨ Financial Statements Notes
2482 NEW ZEALAND GAZETTE, No. 93 2 AUGUST 2010
Notes to the financial statements
in New Zealand Dollars ($000’s)
18 Financial instruments (continued)
There have been no material changes in the Group’s management of capital during the period.
Sensitivity analysis
In managing interest rate and currency risks, the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings. Over the longer-term, however, permanent changes in foreign exchange and interest rates will have an impact on profit.
At 31 March 2010, it is estimated that a general increase/(decrease) of one percentage point in interest rates would increase/(decrease) the Group’s profit before income tax by approximately $11,420,000 (2009: $14,060,000). Interest rate swaps have been included in this calculation.
This calculation has been performed by determining which of the Group’s financial assets are impacted by market interest rates, as opposed to those with fixed interest rates or variable interest rates where the interest rate risk is managed by way of interest rate swap derivatives. The fair value of the investments are then recalculated under a scenario where interest rates are one percentage point higher.
It is estimated that a general increase/(decrease) of 15 percentage point in the value of the New Zealand dollar against other foreign currencies would have decreased/(increased) the Group’s profit before income tax by approximately $16,398,000 for the year ended 31 March 2010. For the year ending 31 March 2009 a 15 percentage point increase/(decrease) in the value of the New Zealand dollar would have decreased/(increased) the Group’s profit before tax by $10,909,000. The forward exchange contracts have been included in this calculation.
This calculation is performed by firstly determining which financial assets are denominated in an overseas currency and where the exchange rate risk is not managed by way of foreign exchange contracts. A calculation is then performed to simulate the impact of a change in the value of the New Zealand dollar.
Estimation of fair value
The methods used in determining the fair values of financial instruments are discussed in note 4.
Fair value hierarchy
NZ IFRS 7 requires that the classification of financial instruments at fair value be determined by reference to the source of inputs used to derive the fair value. This classification uses the following three-level hierarchy:
- Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities
- Level 2 — inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e., derived from prices)
- Level 3 — inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The fair value of the financial instruments as well as methods used to estimate the fair values are summarised in the following table:
| 2010 | Level 1 | Level 2 | Level 3 | |
|---|---|---|---|---|
| Financial Assets | ||||
| Investments | 345,540 | 92,777 | 33,118 | |
| Derivatives | - | 323 | - | |
| 345,540 | 93,100 | 33,118 | ||
| Financial Liabilities | ||||
| Derivatives | - | 2,547 | - | |
| - | 2,547 | - |
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NZ Gazette 2010, No 93
✨ LLM interpretation of page content
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Canterbury Community Trust Financial Statements Notes
(continued from previous page)
💰 Finance & Revenue5 July 2010
Financial Instruments, Interest Rate Risk, Investment, Interest Rate Swaps, Capital Management, Canterbury Community Trust