Page 77 - Statement of Intent 2015/16

A non-derivative financial instrument is recognised if the Waikato DHB becomes a party to the contractual provisions of the instrument, and derecognised if the Waikato DHB’s contractual rights to the cash flows from the financial assets expire or transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Purchases and sales of financial assets are accounted for at trade date, i.e. the date that the Waikato DHB commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Waikato DHB’s obligations specified in the contract expire or are discharged or cancelled.
Cash and cash equivalents comprise cash balances and call deposits with maturity of no more than three months from the date of acquisition. Bank overdrafts repayable on demand are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
Accounting for finance income and expense is explained in a separate note.
Subsequent to initial recognition, other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses.
Derivative financial instruments
Derivative financial instruments comprise of foreign exchange and interest rate swap contracts to hedge exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. Derivative financial instruments that do not qualify for hedge accounting are accounted for as trading instruments.
Derivative financial instruments are recognised initially at fair value and subsequent to initial recognition are stated at fair value. The gain or loss on remeasurement to fair value is recognised immediately in the statement of comprehensive income. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged.
The fair value of interest rate swaps is the estimated amount received or paid to terminate the swap at the balance date, taking into account current interest rates and the current creditworthiness of the swap counterparties. The fair value of foreign exchange contracts is their quoted market price at the balance date, being the present value of the quoted forward price.
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