Full Annual Report - Inchcape

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Financial statements Notes to the accounts continued 23 Financial instruments continued f. Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, Group Treasury aims to maintain flexibility in funding by keeping committed credit lines available. Refer to the Financial Review on page 39, for discussion of liquidity risks to the Group. The table below summarises the maturity profile of the Group’s financial assets and liabilities at 31 December 2009 based on expected undiscounted cash flows: 2009 Less than 3 months £m Between 3 to 12 months £m Between 1 to 5 years £m More than 5 years £m Financial assets Cash and cash equivalents 381.3 – – – 381.3 Trade and other receivables 231.9 11.7 1.2 0.5 245.3 Available for sale financial assets 0.4 0.4 6.0 11.8 18.6 Derivative financial instruments 6.3 18.5 73.6 382.9 481.3 Total £m 619.9 30.6 80.8 395.2 1,126.5 Financial liabilities Interest bearing loans and borrowings (126.8) (57.0) (75.7) (358.8) (618.3) Trade and other payables (692.0) (148.7) (48.4) – (889.1) Derivative financial instruments (20.2) (7.2) (22.2) (283.9) (333.5) (839.0) (212.9) (146.3) (642.7) (1,840.9) Net outflows (219.1) (182.3) (65.5) (247.5) (714.4) 2008 Less than 3 months £m Between 3 to 12 months £m Between 1 to 5 years £m More than 5 years £m Financial assets Cash and cash equivalents 458.0 – – – 458.0 Trade and other receivables 219.4 28.2 4.8 0.4 252.8 Available for sale financial assets 0.3 1.8 4.1 13.7 19.9 Derivative financial instruments 310.0 319.2 78.9 415.7 1,123.8 987.7 349.2 87.8 429.8 1,854.5 Financial liabilities Interest bearing loans and borrowings (148.1) (45.7) (500.4) (544.4) (1,238.6) Trade and other payables (794.9) (231.2) (52.9) (0.1) (1,079.1) Derivative financial instruments (262.1) (220.0) (48.5) (291.9) (822.5) (1,205.1) (496.9) (601.8) (836.4) (3,140.2) Net outflows (217.4) (147.7) (514.0) (406.6) (1,285.7) Total £m 124 Inchcape plc ¦ Annual Report and Accounts 2009
Section Three Financial statements 23 Financial instruments continued g. Hedging activities Effective 1 January 2009, the Group adopted the amendment to IFRS 7 for financial instruments that are measured in the consolidated statement of financial position at fair value. This requires disclosure of fair value measurements by level for the following fair value measurement hierarchy: • quoted prices in active markets (level 1); • inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly (level 2); or • inputs for the asset or liability that are not based on observable market data (level 3). The following table presents the Group’s assets and liabilities that are measured at fair value: 2009 Assets Derivatives used for hedging – 91.0 91.0 Available for sale financial assets 18.5 – 18.5 18.5 91.0 109.5 Liabilities Derivatives used for hedging – 21.8 21.8 Level 1 represents the fair value of financial instruments that are traded in active markets and is based on quoted markets prices at the end of the reporting period. The fair value of financial instruments that are not traded in an active market (level 2) is determined by using valuation techniques which include the present value of estimated future cash flows. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. Derivative financial instruments are carried at their fair values. The fair value of forward foreign exchange contracts and foreign exchange swaps represents the difference between the value of the outstanding contracts at their contracted rates and a valuation calculated using the spot rates of exchange prevailing at 31 December 2009. The Group’s derivative financial instruments comprise the following: 2009 £m Level 1 £m Assets 2008 £m Level 2 £m 2009 £m Total £m Liabilities 2008 £m Cross currency interest rate swap 84.7 155.6 – – Forward foreign exchange contracts 6.3 151.3 (21.8) – 91.0 306.9 (21.8) – The ineffective portion recognised in the consolidated income statement that arises from fair value hedges amounts to a gain of £0.9m (2008 – a gain of £2.8m). The ineffective portion recognised in the consolidated income statement that arises from cash flow hedges amounts to a gain of £0.6m (2008 – £0.4m). There was no ineffectiveness to be recorded from hedges of net investments. www.inchcape.com 125
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Annual Report and Accounts 2009 Ind
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Section One Business review Financi
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Global experience Section One Busin
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Full Annual Report - Inchcape

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