Notes to the financial statements
For the 52 weeks ended 1 March 2008
26. Other financial assets and liabilities
| Current 2008 £m |
Non-current 2008 £m |
Current 2007 £m |
Non-current 2007 £m |
|
|---|---|---|---|---|
| Other financial assets | ||||
| Cash flow hedge – foreign exchange contracts | 4.3 | – | – | – |
| Available-for-sale financial assets | – | 14.2 | – | 8.5 |
| Total other financial assets | 4.3 | 14.2 | – | 8.5 |
| Other financial liabilities | ||||
| Cash flow hedge – foreign exchange contracts | (2.8) | – | (1.7) | – |
| Fair value hedge – interest rate swap | – | – | (0.5) | – |
| Total other financial liabilities | (2.8) | – | (2.2) | – |
The cash flow hedges are intended to hedge the foreign currency exposures of future purchases of inventory. The hedged cash flows are expected to occur up to one year into the future and will be transferred to the consolidated income statement or inventory carrying value as applicable.
Forward foreign exchange contracts
Gains and losses recognised in the hedging reserve in shareholders’ equity on forward foreign exchange contracts as of 1 March 2008 and 3 March 2007 will be released to the income statement within one year from the balance sheet date. The notional principal amounts of the outstanding forward foreign exchange contracts at 1 March 2008 were £543.6m (2007: £579.0m).
Interest rate swaps
The notional principal amounts of the outstanding interest rate swap contracts as at 1 March 2008 were £nil (2007: £225.0m). At 3 March 2007, the main floating rates were based on LIBOR. Gains and losses recognised in the hedging reserve in shareholders’ equity on interest rate swap contracts are continuously released to the income statement until the repayment of the bank borrowings. Home Retail Group’s activities expose it to a variety of financial risks and Home Retail Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on Home Retail Group’s performance.
Available-for-sale financial assets
Available-for-sale financial assets are measured at fair value or, where fair value cannot be reliably measured, at cost less impairment.
Fair value estimation
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the balance sheet date.
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