CITY DEVELOPMENTS LIMITED ANNUAL REPORT 2021 FINANCIALS 238 239 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2021 YEAR ENDED 31 DECEMBER 2021 41 FINANCIAL INSTRUMENTS (CONT’D) (iv) Hedge accounting (cont’d) When the hedging instrument is a forward exchange contract or cross-currency swap, the Group establishes a hedge ratio where the notional on the forward foreign exchange contract and cross-currency swap matches the carrying amount of the designated net investment. The Group ensures that the foreign currency in which the hedging instrument is denominated is the same as the functional currency of the net investment. This qualitative assessment is supplemented quantitatively using the hypothetical derivative method for the purposes of assessing hedge effectiveness. The Group assesses effectiveness by comparing past changes in the fair value of the derivative with changes in the fair value of a hypothetical derivative. The hypothetical derivative is constructed to have the same critical terms as the net investment designated as the hedged item and a fair value of zero at inception. The Group’s policy is to hedge the net investment only to the extent of the nominal amount of the foreign exchange or cross-currency swap leg of the derivative. The Group held the following instruments to hedge exposures to changes in foreign currencies: Notional amount Carrying amount - Assets/ (Liabilities) Line item in the statement of financial position where the hedging instrument is included Changes in the value of the hedging instrument recognised in OCI Hedge ineffectiveness recognised in profit or loss Line item in profit or loss that includes hedge ineffectiveness Amount reclassified from reserve to profit or loss Hedged foreign exchange rate Year of maturity $’000 $’000 $’000 $’000 Group Net investment hedges 2021 Foreign exchange risk - Borrowings to hedge net investments in foreign operations $721,426,000 equivalent (721,426) Interest-bearing borrowings (2,288) – Not applicable – Not applicable 2022 to 2025 - Cross-currency swaps to hedge net investments in foreign operations RMB74,190,000 (347) Other liabilities (331) (16) Finance costs – SGD/RMB 4.81 2023 2020 Foreign exchange risk - Borrowings to hedge net investments in foreign operations $642,665,000 equivalent (642,665) Interest-bearing borrowings 9,080 109 Finance costs – Not applicable 2021 to 2025 - Cross-currency swaps to hedge net investments in foreign operations RMB74,190,000 (444) Trade and other payables (628) – Not applicable – SGD/RMB 5.09 2021 - Forward exchange contracts to hedge net investments in foreign operations RMB220,000,000 213 Trade and other receivables 213 – Not applicable – SGD/RMB 4.90 2021
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