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330 l Introduction l Nature of Business l Organisation and Shareholding Structure l Business Review l Corporate Governance l Financial Statements l Other Information l
of the trains and related equipment and maintenance services in Euro There is an economic relationship between the hedged items and the
and loan in USD. The debt instruments and foreign exchange forward hedging instruments as the terms of debt instruments, the foreign
contract balances vary with the level of expected foreign currency the exchange forward contracts, cross currency and interest rate swap and
purchases of the trains and related equipment and maintenance services interest rate swaps match those of the expected highly probable forecast
in Euro and changes in foreign exchange forward rates. transactions (i.e., notional amount and expected payment date). The
Group has established a hedge ratio of 1:1 for the hedging relationships
Interest rate risk as the underlying risks of the foreign exchange, cross currency and
interest rate swap and interest rate swap are identical to the hedged
The Group uses interest rate swaps which are designated as hedging risk components. To test the hedge effectiveness, the Group uses the
instruments to hedge cash flows on variable-rate loans. The Group hypothetical derivative method and compares the changes in the fair
agrees to exchange the difference between fixed and floating rate value of the hedging instruments against the changes in fair value of
interest amounts calculated on agreed notional principal amounts. The the hedged items attributable to the hedged risks.
fair value of interest rate swaps at the reporting date is determined by
discounting the future cash flows using the curves at the reporting date
and the credit risk inherent in the contract. The interest rate swaps and Hedge ineffectiveness can arise from:
the interest payments on the loan occur simultaneously and the amount
accumulated in equity is reclassified to profit or loss over the period - Differences in the timing of the cash flows of the hedged items and
that the floating rate interest payments on debt affect profit or loss. the hedging instruments
Foreign currency and interest rate risk - Different indexes (and accordingly different curves) linked to the
hedged risk of the hedged items and hedging instruments
The Group uses cross currency and interest rate swap which is
designated as hedging instruments to hedge cash flows on variable- - The counterparties’ credit risk differently impacting the fair value
rate loans. These cross currency and interest rate swap comprise about movements of the hedging instruments and hedged items
ZTIBOR of loans.
- Changes to the forecasted amount of cash flows of hedged items
and hedging instruments
Details of debt instruments and derivatives, by maturity, hold as hedging
instruments as at 31 March 2022 and 2021 are, as follows:
