b"CHP financial statements 2020/2021Notes to the financial statements 2020/2021 Recognition and de-recognitionpaid or received that form an integral part of the effective Derivative financial instruments: Group and association2019/2020 Financial assets and financial liabilities are recognised ininterest rate, transaction costs and other premiums the Groups balance sheet when the Group becomes aor discounts) through the expected life of the debt000000 party to the contractual provisions of the instrument.instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Derivatives that are designated and effective as hedging instruments carried Financial assets are derecognised when (a) the contractual at fair value Liabilities rights to the cash flows from the financial asset expireDerivative financial instruments or are settled, (b) the Group transfers to another partyDerivatives are initially recognised at fair value at the date Interest rate swaps 66,371 57,703 substantially all of the risks and rewards of ownershipa derivative contract is entered into and are subsequently Non-hedged instruments carried at fair valueof the financial asset, or (c) the Group, despite having toremeasured to their fair value at each balance sheet retain some significant risks and rewards of ownership, hasdate. The resulting gain or loss is recognised in profit or Liabilities transferred control of the asset to another party and is ableloss immediately unless the derivative is designated and to exercise that ability unilaterally and without needing toeffective as a hedging instrument, in which event the RPI swaps - 24,330 impose additional restrictions on the transfer. Financialtiming of the recognition in profit or loss depends on the Derivative financial instruments 66,371 82,033 liabilities are derecognised only when the obligationnature of the hedge relationship. specified in the contract is discharged, cancelled or A derivative with a positive fair value is recognised as a expires. Financial liabilities are derecognised only when thefinancial asset whereas a derivative with a negative fair obligation specified in the contract is discharged, cancelledvalue is recognised as a financial liability. A derivative is Outstanding - Average contractNotional Principle Fair value or expires. receive floating andfixed interest rate value presented as a non-current asset or a non-current liability pay fixed contracts Offsettingif the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled 2020/2021 2020/20212019/2020 Financial assets and liabilities are only offset in thewithin 12 months. Other derivatives are presented as 2019/2020 statement of financial position when there exists a legally enforceable right to set off the recognised amounts andcurrent assets or current liabilities. % % '000 '000 '000 '000 the Group intends to either settle on a net basis, or toFair value measurement Less than onerealise and settle the liability simultaneously.The best evidence of fair value is a quoted price for an year Initial measurementidentical asset in an active market. When quoted prices One to two years -4.35%-675Financial assets and financial liabilities are initiallyare unavailable, the price of a recent transaction for an measured at fair value. Transaction costs that are directlyidentical asset provides evidence of fair value as long Two to five years 5.13%5.48%15,15015,1503,9921,484attributable to the acquisition or issue of financial assetsas there has not been a significant change in economic Five years + 3.53%4.61%161,850161,85062,379 55,544and financial liabilities (other than financial assets andcircumstances or a significant lapse of time since the financial liabilities at fair value through profit or loss) aretransaction took place. If the market is not active and 177,000177,00066,371 57,703 added to or deducted from the fair value of the financialrecent transactions of an identical asset on their own are assets or financial liabilities, as appropriate, on initialnot a good estimate of fair value, the fair value is estimated recognition. Transaction costs directly attributable to theby using a valuation technique. The above details the notional principal amountsto occur and to affect profit or loss over the period toacquisition of financial assets or financial liabilities at fairHedge accounting and remaining terms of interest rate swaps contractsmaturity of the interest rate swaps. Financial assets andvalue through profit or loss are recognised immediately inThe Group designates certain interest rate swap derivative outstanding at the reporting date.liabilities comprise trade and other debtors, cash andprofit or loss.financial instruments as cash flow hedges. The interest rate swaps settle on a quarterly basis. Thecash equivalents, trade and other payables, loans andSubsequent measurementAt the inception of the hedge relationship, the Group floating rate on the interest rate swaps is three monthsderivatives financial instruments.Financial assets and liabilities (other than financialdocuments the relationship between the hedging LIBOR. The Group will settle the difference between theThe Group has made an accounting policy choice to applyassets and liabilities at fair value through profit or loss)instrument and the hedged item, along with its risk fixed and floating interest rate on a net basis.the recognition and measurement requirements of IFRS 9are subsequently measured at amortised cost using themanagement objectives and its strategy for undertaking Financial Instruments.effective interest method, less any impairment. Wherevarious hedge transactions. Furthermore, at the inception Interest rate swap contracts exchanging floating ratea premium or discount has been incurred on a bondof the hedge and on an ongoing basis, the Group interest amounts for fixed rate interest amounts areissue, this is released over the term of the debt using thedocuments whether the hedging instrument is highly designated as cash flow hedges to reduce the Groupseffective interest rate method.effective in offsetting changes in cash flows of thecash flow exposure resulting from variable interest ratesInterest income and expense is recognised by applying thehedged item. on borrowings. The hedged cash flows are expectedeffective interest rate, except for short-term receivablesCash flow hedges and payables when the recognition of interest would beThe effective portion of changes in the fair value of immaterial. The effective interest method is a method ofderivatives that are designated and qualify as cash flow calculating the amortised cost of a debt instrument and ofhedges is recognised in other comprehensive income. The allocating interest income over the relevant period.gain or loss relating to the ineffective portion is recognised The effective interest rate is the rate that exactly discountsimmediately in profit or loss and is included in the other estimated future cash receipts (including all fees and pointsgains and losses line item. 82 83"