✨ Financial Statements
4336 NEW ZEALAND GAZETTE, No. 155 25 NOVEMBER 2013
TRANSPOWER NEW ZEALAND LIMITED LINES BUSINESS
6. Change in fair value of financial instruments
| LINES BUSINESS | 2013 | 2012 |
|---|---|---|
| $M | $M |
Accounting hedges
Foreign exchange forward contracts - hedge accounted (25.9) (5.8)
Hedge commitment 25.9 5.8
Other
Foreign debt 24.6 16.7
Cross currency interest rate swaps 42.5 (75.5)
Foreign interest rate swaps 9.2 2.3
Basis swaps (2.2) 2.6
NZD interest rate swaps (37.3) 169.1
Foreign exchange forward contracts - not hedge accounted - 0.2
Investments
NZD debt (35.6) 5.8
Fair value movement FX Swaps (1.0) -
Available for sale assets (0.4) 0.6
(0.2) 121.8
Total fair value (gain) loss (0.2) 121.8
The above fair value movements are as a result of the Transpower Lines Business recognising the financial instruments at fair value through profit or loss or as fair value hedges.
The Transpower Lines Business experiences fair value movements principally through movements in underlying interest rates and exchange rates. The Transpower Lines Business generally seeks to fix interest rates to provide certainty of interest rate costs. This means that, prima facie, a decrease in market interest rates will result in the Transpower Lines Business sustaining fair value losses and conversely an increase in market interest rates will result in fair value gains.
Credit spread impact
Corporate spread debt has a credit spread built into the pricing that is applied by the market, over and above the swap curve. This spread represents the additional risk of a corporate debt obligation compared with a liquid net settled swap transaction. Note 17 Debt, financial Instruments and risk management, part iv credit risk, includes discussion of the credit spread impact on fair value.
Foreign purchases
The Transpower Lines Business hedges against foreign currency fluctuations on certain foreign purchases through the use of foreign exchange forward contracts. The "hedge commitment" represents the non derivative fair value movement, attributable to foreign exchange movements, on the commitment to buy the goods, i.e. before the goods or an invoice are received.
Debt and investments
Refer to Note 17 Debt, financial Instruments and risk management for information on the use of debt, investments and derivatives.
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NZ Gazette 2013, No 155
✨ LLM interpretation of page content
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Transpower New Zealand Limited Statement of Accounting Policies
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🏭 Trade, Customs & IndustryAccounting Policies, Financial Statements, Operating Expenses, Depreciation, Amortisation, Fair Value, Financial Instruments, Interest Rates, Exchange Rates, Credit Spread, Foreign Purchases, Debt, Investments