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Integrated Report 2016
ANNUAL FINANCIAL STATEMENTS
(continued)
FAIR VALUE HIERARCHY
The Group classifies all financial instruments and its fair value hierarchy as follows:
Statement of financial
2016
2015
Financial instruments
Classification per IAS 39
position line item
R’000
R’000
Investments
(1)
Available-for-sale
Other financial assets
2 215
2 915
Black Managers Share Trust
Loans and receivables
Other financial assets
72 095
88 191
Trade and sundry receivables
Loans and receivables
Trade and other receivables
1 365 284
1 288 807
Foreign exchange contracts –
derivative asset
(2)
Fair value cash flow hedge
Trade and other receivables
576
294
Cash and cash equivalents
Loans and receivables
Cash and cash equivalents
200 555
147 379
Long-term borrowings
Loans and borrowings
Long-term borrowings
500 000
513 753
Trade and other payables
Loans and borrowings
Trade and other payables
1 532 979
1 321 585
Foreign exchange contracts –
derivative liability
(2)
Fair value cash flow hedge
Trade and other payables
23 552
205
Short-term borrowings
Loans and borrowings
Short-term borrowings
–
13 273
Bank overdraft
Loans and borrowings
Bank overdraft
11 755
304 210
(1)
Level 3. The value of the investment in Group Risk Holdings is based on Adcock Ingram’s proportionate share of the net asset value of the company.
(2)
Level 2. Fair value based on the ruling market rate at year-end. The fair value of the forward exchange contract is calculated as the difference in the forward exchange rate as per
the contract and the forward exchange rate of a similar contract with similar terms and maturities concluded as at the valuation date multiplied by the foreign currency monetary
units as per the FEC contract.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial liabilities comprise borrowings and trade payables. The main purpose of these financial liabilities is to raise
finance for the Group’s operations.
The Group has various financial assets such as trade and other receivables, loans receivable and cash which arise directly from its operations.
The Group also enters into derivative transactions via forward currency contracts. The purpose is to manage the currency risks arising from the
Group’s operations.
It is, and has been throughout 2016, the Group’s policy that no trading in derivatives shall be undertaken.
The main risks arising from the Group’s financial instruments are interest rate, credit, liquidity and foreign currency. The Board of directors
reviews and agrees policies for managing each of these risks which are summarised below:
INTEREST RATE RISK
The Group is exposed to interest rate risk as the following assets and liabilities carry interest at rates that vary in response to the lending rates
in the continuing operations in South Africa and Zimbabwe and the discontinued operations in India and Ghana:
•
Cash balances which are subject to movements in the bank deposit rates; and
•
Long-term and short-term debt obligations with floating interest rates linked to the Johannesburg Interbank Agreed Rate, the South African
prime, Indian bank lending rates and the Stannic Bank Base Rate (Ghana).
The Group’s policy is to manage its interest rate risk through both fixed and variable, long-term and short-term instruments at various approved
financial institutions.
No financial instruments are entered into to mitigate the risk of interest rates.
ANNEXURE E – FINANCIAL INSTRUMENTS