Adcock Ingram Integrated Report 2018

121 ADCOCK INGRAM  Integrated Report 2018 Annexure E – Financial instruments continued FOREIGN CURRENCY RISK As the Group operates in various countries and undertakes transactions denominated in foreign currencies, exposures to foreign currency fluctuations arise. Exchange rate exposures on transactions are managed within approved policy parameters utilising forward exchange contracts in conjunction with external consultants who provide financial services to Group companies as well as contributing to the management of the financial risks relating to the Group’s operations. Foreign operations In translating the foreign operations, the following exchange rates were used: 2018 2018 2017 2017 Income/ Expenses Assets/ Liabilities Income/ Expenses Assets/ Liabilities Average Spot Average Spot Rand Rand Rand Rand Ghanaian Cedi 2.8410 2.8662 3.2055 2.9718 Indian Rupee 0.1977 0.2005 0.2049 0.2024 Kenyan Shilling 0.1250 0.1360 0.1323 0.1261 United States Dollar 12.8635 13.7275 13.6114 13.0551 Foreign assets/liabilities In converting foreign denominated assets and liabilities, the following exchange rates were used: Assets Liabilities Rand Rand 2018 Euro 15.99 16.00 US Dollar 13.72 13.73 2017 Euro 14.90 14.93 US Dollar 13.05 13.06 CASH FLOW HEDGES The Group’s current policy for the management of foreign exchange is to cover 100% of foreign currency commitments with forward exchange contracts when a firm commitment for any order is in place. As a result, all material foreign liabilities were covered by forward exchange contracts at year-end. The forward currency contracts must be in the same currency as the hedged item. It is the Group’s policy to fix the terms of the hedge derivatives to match the terms of the hedged item to maximise hedge effectiveness. The fair value is determined using the applicable foreign exchange spot rates at reporting dates. At 30 June 2018, the Group held no foreign exchange contracts designated as hedges of expected future sales to customers outside South Africa for which the Group has firm commitments. The Group had foreign exchange contracts outstanding at 30 June 2018 designated as hedges of expected future purchases from suppliers outside South Africa for which the Group has firm commitments. All foreign exchange contracts will mature within 12 months. The cash flow hedges of expected future purchases were assessed to be effective. The effective portion of the gains and losses on the hedging instruments that is included in the initial cost of inventory is R27.7 million (2017: R87.0 million).