Glanbia plcAnnual Report 2011Financial statementswww.glanbia.comForeign exchange contractsLess than1 year?'000Between 1and 2years?'000Between 2and 5years?'000Morethan 5years?'000Total?'000At 31 December 2011Foreign exchange contracts - cash flow hedgesInflow 717--- 717Outflow(2,028)---(2,028)(1,311)---(1,311)Foreign exchange contractsLess than1 year?'000Between 1and 2years?'000Between 2and 5years?'000Morethan 5years?'000Total?'000At 1 January 2011Foreign exchange contracts - cash flow hedgesInflow590--- 590Outflow(600)---(600)(10)---(10)The table below analyses the Group's foreign exchange contracts, which will be settled on a gross basis into relevantmaturity groupings based on the remaining period from the reporting date to the contractual maturity date. The amountsdisclosed in the table are the contractual undiscounted cash flows.3.2 Capital risk managementThe Group's objective when managingcapital are to safeguard the Group'sability to continue as a going concernin order to provide returns forshareholders and benefits for otherstakeholders and to maintain anoptimal capital structure to reduce thecost of capital. Total capital iscalculated based on equity as shownin the statement of financial positionand net debt which amounted to?1,003.3 million (2010: ?832.5 million).In order to maintain or adjust thecapital structure, the Group may adjustthe amount of dividends paid toshareholders, return capital toshareholders, issue new shares or sellassets to increase or reduce debt orbuy back shares.The Group monitors debt capital onthe basis of interest cover and debt toEBITDA ratios. At 31 December 2011,the Group's debt/adjusted EBITDAratio was 2.1 times (2010: 2.1 times),which is deemed by management tobe prudent and in line with industrynorms. Adjusted EBITDA for thepurpose of financing ratios is GroupEBITDA plus dividends received fromJoint Ventures & Associates.3.3 Fair value estimationThe fair value of financial instrumentstraded in active markets (such asavailable for sale securities) is basedon quoted market prices at 31December 2011. The quoted marketprice used for financial assets held bythe Group is the current bid price.The fair value of financial instruments thatare not traded in an active market (forexample, over the counter derivatives) isdetermined by using valuationtechniques. The Group uses a variety ofmethods and makes assumptions thatare based on market conditions existingat each reporting date. Quoted marketprices or dealer quotes for similarinstruments are used for long-term debt.Other techniques, such as estimateddiscounted cash flows, are used todetermine fair value for the remainingfinancial instruments. The fair value ofinterest rate swaps is calculated as thepresent value of the estimated futurecash flows. The fair value of forwardforeign exchange contracts isdetermined using quoted forwardexchange rates at 31 December 2011.The carrying value less impairmentprovision of trade receivables andpayables is assumed to approximatetheir fair values due to the short-termnature of trade receivables and tradepayables. The fair value of financialliabilities for disclosure purposes isestimated by discounting the futurecontractual cash flows at currentmarket interest rates that are availableto the Group for similar financialinstruments.In accordance with IFRS 7 - 'FinancialInstruments: Disclosures', the Grouphas disclosed the fair value ofinstruments by the following fair valuemeasurement hierarchy:> quoted prices (unadjusted) in activemarkets for identical assets andliabilities (level 1);> inputs, other than quoted pricesincluded in level 1, that areobservable for the asset and liability,either directly (that is, as prices) orindirectly (that is, derived fromprices) (level 2); and> inputs for the asset or liability thatare not based on observable marketdata (that is, unobservable inputs)(level 3).
Glanbia plcAnnual Report 2011Financial statementswww.glanbia.comAt 31 December 2011NotesLevel 1?'000Level 2?'000Level 3?'000Total?'000AssetsDerivatives used for hedging32- 6,161- 6,161Available for sale financial assets - equity securities18 152 1,490- 1,642Total assets 152 7,651- 7,803LiabilitiesDerivatives used for hedging32-(6,976)-(6,976)Total liabilities-(6,976)-(6,976)At 1 January 2011NotesLevel 1?'000Level 2?'000Level 3?'000Total?'000AssetsDerivatives used for hedging 32- 5,555- 5,555Available for sale financial assets - equity securities 18 143 2,983-3,126Total assets 143 8,538- 8,681LiabilitiesDerivatives used for hedging32-(9,802)-(9,802)Total liabilities-(9,802)-(9,802)The following table presents the Group's assets and liabilities, which are measured at fair value at 31 December 2011 and 1January 2011.