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		prev: Deferred taxation next: Share capital back: Notes to the accounts back: Financial statements menu pdf [1,644k] 24 Financial instruments Details of the Group's policies on the use of financial instruments are given in the Finance Director's review and in the accounting policies. The following disclosures provide additional information regarding the effect of these instruments on the financial assets and liabilities of the Group, excluding short-term debtors and creditors where permitted by FRS 13. Funding and interest rates   2003   Sterling £m US Dollar £m Euro £m Other £m Total £m Financial assets Cash at bank and in hand1 139 497 34 124 794 Short-term deposits 2 108 — — 27 135 Government securities and corporate bonds 3 39 — — — 39 Unlisted fixed asset investments 4 47 9 2 5 63 Debtors –amounts falling due after one year 4 87 59 13 2 161   420 565 49 158 1,192 Financial liabilities 5 Floating-rate borrowings 6 — (290) (8) (12) (310) Fixed-rate borrowings (729) (130) (2) (118) (979) Borrowings on which no interest is paid 7 — — — (2) (2) Other creditors –amounts falling due after one year 4 (32) (43) — — (75)   (761) (463) (10) (132) (1,366)   2002   Sterling £m US Dollar £m Euro £m Other £m Total £m Financial assets Cash at bank and in hand 1 180 292 83 79 634 Short-term deposits 2 15 3 — 26 44 Government securities and corporate bonds 3 39 1 — — 40 Unlisted fixed asset investments 4 46 12 2 8 68 Debtors –amounts falling due after one year 4 65 39 — 20 124   345 347 85 133 910 Financial liabilities 5 Floating-rate borrowings 6 (96) (53) (9) (1) (159) Fixed-rate borrowings (833) (151) — (166) (1,150) Borrowings on which no interest is paid 7 — — — (4) (4) Other creditors –amounts falling due after one year 4 (1) (85) — (2) (88)   (930) (289) (9) (173) (1,401) Notes 1 Cash at bank and in hand comprises bank balances and deposits placed on money markets overnight. 2 Short-term deposits are deposits placed on money markets for periods ranging from two nights up to one month. 3 Interest on the securities and bonds are at fixed rates. The weighted average interest rate on the sterling securities is 5.0% (2002 5.1%). The weighted average time for these securities is 2.5 years (2002 2.3 years). 4 These amounts do not incur or accrue interest. 5 Financial liabilities are stated after taking into account the various interest rate and currency swaps entered into by the Group. 6 Floating-rate financial liabilities comprise borrowings bearing interest at rates fixed in advance for periods ranging from one to six months based on the applicable LIBOR rate. 7 The weighted average period for borrowings on which no interest is paid is six years (2002 seven years). The analysis of fixed-rate borrowings is as follows: 2003 2002   Total £m Weighted average interest rate at which fixed % Weighted average period for which rate is fixed Months Total £m Weighted average interest rate at which fixed % Weighted average period for which rate is fixed Months Currency Sterling 729 6.7 15 833 7.3 14 US Dollar 130 7.2 38 151 7.0 56 Other 120 5.4 22 166 5.2 32 The maturity profile of the Group's financial liabilities is as follows:   2003 £m 2002 £m In one year or less, or on demand 94 275 In more than one year but not more than two years 304 194 In more than two years but not more than five years 476 712 In more than five years 492 220   1,366 1,401 Borrowing facilities The Group has various borrowing facilities available to it. The undrawn committed facilities available at December 31, 2003 were as follows:   2003 £m 2002 £m Expiring within one year 91 64 Expiring in one to two years 67 500 Expiring thereafter 853 825   1,011 1,389 Exchange risk management The table below shows the Group's currency exposures at December 31, 2003 on currency transactions that give rise to the net currency gains and losses recognised in the profit and loss account. Such exposures comprise the net monetary assets and liabilities of the Group at December 31, 2003 that are not denominated in the functional currency of the operating company involved. The exposures are stated after taking into account the effects of currency swaps and forward foreign exchange contracts.   2003 Net foreign currency monetary assets/(liabilities) 2002 Net foreign currency monetary assets/(liabilities) Functional currency of Group operation Sterling £m US Dollar £m Euro £m Other £m Sterling £m US Dollar £m Euro £m Other £m Sterling — (3) — 3 — (3) (1) 2 US Dollar — — — — 1 — — (1) Euro (3) — — 1 1 1 — — Other (2) 2 3 1 2 1 — — Fair values of financial assets and financial liabilities The estimated fair value of the Group's financial instruments are summarised below:   2003 2002   Book value £m  Fair value £m Book value £m  Fair value £m Unlisted fixed asset investments 63 63 68 68 Cash at bank and in hand 794 794 634 634 Short-term deposits and investments 174 176 84 87 Short-term debt (94) (92) (275) (281) Long-term debt (1,197) (1,342) (1,038) (1,170) Other creditors –amounts falling due after one year (75) (72) (88) (85) Debtors –amounts falling due after one year 161 154 124 119 Derivatives used to hedge the interest, currency and commodity exposure of the business: Jet fuel swaps — 6 — 2 Interest rate swaps (27) (1) (24) (58) Currency options — — — (1) Forward foreign currency contracts — 724 — 151 Forward purchase of shares to meet share option commitments — (10) — (59) Where available, market values have been used to determine current values. Where market values are not available, fair values have been calculated by discounting expected future cash flows at prevailing interest and exchange rates. Cash at bank and in hand, short-term deposits and short-term borrowings: The book value approximates to fair value either due to the short-term maturity of the instruments or because the interest rate of investments is reset after periods not greater than six months. Derivatives: The fair value of derivatives is the estimated amount, based on current market rates, which the Group would expect to pay or receive were it to terminate the derivatives at the balance sheet date. Hedges of future transactions As described in the Finance Director's review on pages to the Group's policy is to hedge the following exposures: Interest rate risk – using interest swaps Currency exposures on future forecast sales –using forward foreign currency contracts, currency swaps and currency options Commodity price risk – using jet fuel swaps Gains and losses on instruments used for hedging are dealt with as outlined in the accounting policies. Unrecognised gains and losses on instruments used for hedging, and the movements therein, are as follows:   2003 2002   Gains £m (Losses) £m Total net gains/ (losses) £m Gains £m (Losses) £m Total net gains/ (losses) £m Unrecognised gains and losses on hedges at January 1, 2003 390 (331) 59 78 (711) (633) Gains and losses arising in previous year that were recognised in 2003 (199) 143 (56) (46) 209 163 Gains and losses arising in previous year that were not recognised in 2003 191 (188) 3 32 (502) (470) Gains and losses arising in 2003 that were not recognised in 2003 789 (46) 743 358 171 529 Unrecognised gains and losses on hedges at December 31, 2003 of which: 980 (234) 746 390 (331) 59 Gains and losses expected to be recognised in 2004 260 (129) 131 163 (143) 20 Gains and losses expected to be recognised thereafter 720 (105) 615 227 (188) 39