The table below shows the effective and the

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Unformatted text preview: 45 407 3 338 5 412 1 257 811 8 472 383 281 5 985 56 496 2 529 >10 Not Total as of <1 2 3 4 5 6 7 8 9 10 NOK in millions 31.12.10 year years years years years years years years years years Interest bearing liabilities bank loans bonds and Commercial Paper Finance lease liabilities Other interest-bearing liabilities Sum of interest-bearing liabilities 6 655 5 367 487 404 373 24 276 3 006 1 757 689 4 677 897 10 10 11 30 1 472 368 216 180 176 33 299 8 751 2 470 1 284 5 255 24 475 30 175 703 - - - 7 812 34 41 120 112 154 7 966 - - 49 99 148 - - - 5 859 124 43 4 4 128 5 907 - - 513 19 532 Non-interest bearing liabilities Trade and other payables 27 848 27 848 - - - Other current non-interest-bearing liabilities 1 832 1 832 - - - derivatives financial instruments non-current liabilities 690 - 172 179 166 Other non-current non-interest-bearing liabilities 4 232 - - - - Sum of non-interest-bearing liabilities 34 602 29 680 172 179 166 Total 67 900 38 431 2 643 1 463 5 422 - - 131 - 131 834 - - - - - 42 - - 42 154 8 008 - - - - 148 - - - - - - - - 128 5 907 - - - - 4 232 - 4 232 532 4 232 Future interest payments Total including future interest payments 6 398 years specified - 1 434 920 786 727 633 616 526 293 305 - 158 - 74 298 39 865 3 563 2 250 6 149 1 467 770 8 534 441 433 5 907 691 4 232 /page 66/ telenor annual report 2011 notes to the financial statements / telenor group Interest rate risk The Group is exposed to interest rate risk through funding and cash management activities. Changes in interest rates affect the fair value of assets and liabilities. Interest income and interest expense in the income statement are influenced by changes in interest rates in the market. The main consideration regarding management of interest rate risk is to reduce the financial risk and minimise interest cost over time. A portion of the debt issued by the Group is fixed rate debt (96% of outstanding debt before swap as of 31 December 2011 and 94% as of 31 December 2010). The Group applies interest rate derivatives to manage the interest rate risk of the debt portfolio. This typically involves interest rate swaps. Forward rate agreements and interest rate options are used to a lesser extent. According to Group Policy Treasury, Telenor ASA’s total external debt portfolio shall have a duration below 2.5 years, whereas subsidiaries shall have a duration below 1 year. As of 31 December 2011, the average duration of the Group’s debt was 1.3 years (1.4 years as of 31 December 2010). Telenor ASA’s duration was 1.6 years as of 31 December 2011 (1.5 years as of 31 December 2010). Derivative instruments designated as cash flow hedging instruments The Group’s cash flow hedges were mainly related to foreign exchange and interest rate risk. The Group hedged forecasted capital expenditure outflows denominated in foreign currency by entering into currency forward contracts. Interest rate risk for certain bonds issued with floating rate have been hedged using interest rate swaps where the Group receives floating rate and pays fixed rate. The table below shows the effective and the ineffective parts of the Group’s cash flow hedges and the amount that has been recognised at other comprehensive income during the period. The ineffective part is recognised in the income statement as “net foreign currency gains (losses)”. During 2011, the Group has not entered into new cash flow hedges. Cash flow hedging relationships NOK in millions 2010 Cash flow hedging equity reserve at beginning of year Amount reclassified from equity to profit and loss Other adjustments Cash flow hedging equity reserve at the end of year (731) 667 64 - Derivative instruments designated as fair value hedging instruments The Group employs two strategies that qualify for fair value hedge accounting. The first is to issue a fixed rate bond in the currency in which funding is to be raised and consequently enter into an interest rate swap receiving fixed and paying floating interest rate. The second strategy is to hedge a fixed rate bond issued in currency other than local currency by entering into a cross currency interest rate swap receiving fixed rate foreign currency and paying floating rate local currency. The table below shows the effective and the ineffective parts of the Group’s fair value hedges. The ineffective part is recognised as “net change in fair value of financial instruments” under financial items in the income statement. The effective part will be offset by the change in fair value of the underlying hedged item. Effectiveness testing is performed on an accumulated basis. However, the hedging periods are long and the yearly effects may not be representative for the hedge effectiveness. Fair value hedging relationships NOK in millions 2011 2010 Net gain/(loss) recognised in the income statement on hedged items Net gain/(loss) recognised in the income statement on hedging instruments Amount of hedge ineffectiveness (37) 142 105 97 93 190 Interest rate swaps are also used periodic...
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This document was uploaded on 03/21/2014.

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