14 December 2011 to hedge its $100m floating
rate bond issue. Only exposure to the quarterly
BBSW has been designated as the hedged risk.
The gain or loss from remeasuring the hedging
instruments at fair value is recognised in other
comprehensive income and deferred in equity in
the hedging reserve, to the extent that the hedge
is effective. It is reclassified into profit or loss
when the hedged interest expense is recognised.
In the year ended 30 June 2012 there was no
reclassification into profit or loss (2011 ‑ nil). Hedge
effectiveness was assessed at the inception of
the lease and was found to be effective. Hedge
effectiveness was also assessed prospectively
and retrospectively using the cumulative dollar
offset method as at 30 June 2012 as a part of the bi
annual testing. There was no hedge ineffectiveness
in the year ended to 30 June 2012.
(ii) Forward exchange contracts - cash flowhedges
The rail grinding process in NSW uses grinding
stones purchased from the United States. In order
to protect against exchange rate movements,
the Group has entered into forward exchange
contracts to purchase US dollars.
During the financial year ARTC entered into a
contract to purchase a Shoulder Ballast Cleaner
from the United States. In order to protect
against exchange rate movements, the Group
has entered into forward exchange contracts to
purchase US dollars.
These contracts are hedging for purchase
orders made by the Group for the latest set
of material required for the period and for the
final delivery of the Shoulder Ballast Cleaner.
The contracts are timed to mature when
payments for the shipment of these items are
scheduled to be paid.
The portion of the gain or loss on the hedging
instrument that is determined to be an effective
hedge is recognised directly in equity. When the
cash flows occur, the Group adjusts the initial
measurement of the component recognised in the
Consolidated Income Statement by the related
amount deferred in equity.
Group
During the year ended 30 June 2012 there
was a reclassification of cash flow hedge from
equity to profit loss of $7k. There was no hedge
ineffectiveness in the current or prior year.
(b) Risk exposures
Credit risk arises from the potential failure of
counterparties to meet their obligations under the
respective contracts at maturity. This arises on
derivative financial instruments with unrealised
gains. At reporting date the risk is nil in the
current year accounts.
Information about the Group’s exposure to
credit risk, foreign exchange and interest
rate risk is provided in note 2. The maximum
exposure to credit risk at the end of the
reporting period is the carrying amount
of each class of derivative financial assets
mentioned above.
Note 13
Derivative financial instruments (continued)
86
