Financial Statements

Notes to the Group financial statements

for the year ended 31 March 2006

26. Other financial assets and liabilities

	Current	Non-
	2006	current
		2006
Other financial assets	£m	£m
Derivative financial instruments:
Cash flow hedge - foreign exchange contracts	2	–
Fair value hedge of borrowings - interest rate swaps	–	22
Fair value hedge of borrowings - cross currency swap	–	27
Non-hedging derivatives - equity swaps	2	2
Non-hedging derivatives - interest rate swaps	2	19
	6	70
Available for sale assets:
Listed	–	21
Total other financial assets	6	91
	Current	Non-
	2006	current
		2006
Other financial liabilities	£m	£m
Derivative financial instruments:
Fair value hedge of borrowings - interest rate swaps	–	7
Net investment hedge - foreign exchange contracts	13	–
Non-hedging derivatives - foreign exchange contracts	6	–
Non-hedging derivatives - interest rate swaps	2	1
Total other financial liabilities	21	8

The fair value of foreign currency contracts is based on a comparison of the contractual and year end exchange rates. The fair values of other derivative financial instruments are estimated by discounting the future cash flows to net present values using appropriate market rates prevailing at the year end.

The cash flow hedges are intended to hedge the foreign currency exposure of future purchases of inventory. The hedged cash flows are expected to occur up to one year into the future and will be transferred to the Group income statement or inventory carrying value as applicable.

Available for sale assets at 31 March 2005 comprise £24m of listed and £7m of unlisted investments held by the Lewis Group Limited and £8m of shares of Burberry Group plc held by that company. Of the total of £39m, £31m was classified as current and £8m was classified as non-current.

UK GAAP Comparatives

The Group has elected to apply the provisions of IAS 32 and IAS 39 with effect from 1 April 2005. The comparative financial information is prepared in accordance with UK GAAP to the extent that it relates to the recognition and measurement of financial instruments. The nature of the main adjustments that would make the information comply with IAS 32 and IAS 39 are set out in note 39.

An analysis of unrecognised gains and losses on hedging at 31 March 2005 as prepared under UK GAAP is shown below:

	Unrecognised	Unrecognised	Total
	gains	losses	unrecognised
			gains/(losses)
Year ended 31 March 2005	£m	£m	£m
On hedges at 1 April 2004	21	–	21
Arising before 1 April 2004 and recognised during the year ended 31 March 2005	(11)	–	(11)
Arising during the year and not included in current year income	12	(2)	10
At 31 March 2005	22	(2)	20
Expected to be recognised in 2006	14	(2)	12
Expected to be recognised thereafter	8	–	8