british american tobacco p.l.c. annual report 2008 - Notes on the accounts: 4 of 31
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DIRECTORS' REPORT: BUSINESS REVIEW
DIRECTORS' REPORT: GOVERNANCE
FINANCIAL STATEMENTS AND OTHER INFORMATION
4 Net finance costs
| 2009 | 2008 | |||
|---|---|---|---|---|
| £m | £m | £m | £m | |
| Finance costs | ||||
| – interest payable | 602 | 535 | ||
| – fair value changes | 4 | 521 | ||
| – exchange differences | (25) | (398) | ||
| 581 | 658 | |||
| Finance income | ||||
| – interest and dividend income | (85) | (131) | ||
| – exchange differences | 8 | (136) | ||
| (77) | (267) | |||
| Net finance costs | 504 | 391 | ||
| Net finance costs comprise: | ||||
| Interest payable | ||||
| – bank borrowings | 80 | 83 | ||
| – finance leases | 2 | 4 | ||
| – facility fees | 4 | 4 | ||
| – other | 516 | 444 | ||
| 602 | 535 | |||
| Interest receivable | (83) | (129) | ||
| Dividend income | (2) | (2) | ||
| (85) | (131) | |||
| Fair value changes | ||||
| – cash flow hedges transferred from equity | 86 | (201) | ||
| – fair value changes on hedged items | (7) | 168 | ||
| – fair value hedges | (65) | (22) | ||
| – ineffective portion of fair value hedges | (13) | (2) | ||
| – instruments not designated as hedges | 3 | 578 | ||
| 4 | 521 | |||
| Exchange differences | (17) | (534) | ||
| (13) | (13) | |||
| 504 | 391 | |||
Other interest payable includes interest on the bonds and notes detailed in note 21. Facility fees relate principally to the Group’s central banking facility of £1.75 billion, as well as the Group’s €700 million term loan facility entered into in July 2009 (2008: facilities to fund the Tekel acquisition).
Included within interest receivable is £3 million (2008: £1 million) in respect of available-for-sale investments. Included within dividend income is £2 million (2008: £1 million) in respect of available-for-sale investments.
Included within exchange differences is a loss of £25 million (2008: £133 million gain) in respect of items subject to fair value hedges.
IFRS requires fair value changes for derivatives, which do not meet the tests for hedge accounting under IAS 39, to be included in the income statement. In addition, certain exchange differences are required to be included in the income statement under IFRS and, as they are subject to exchange rate movements in a period, they can be a volatile element of net finance costs. These amounts do not always reflect an economic gain or loss for the Group and, accordingly, the Group has decided that, in calculating adjusted diluted earnings per share, it is appropriate to exclude certain amounts.
The adjusted diluted earnings per share for the year ended 31 December 2008 (note 7) excludes, in line with previous practice, an £11 million loss relating to exchange losses in net finance costs where there is a compensating exchange gain reflected in differences in exchange taken directly to other comprehensive income. There are no similar gains or losses in the year ended 31 December 2009.
Although the Group has adopted IAS 23 Revised (Borrowing Costs) effective from 1 January 2009, the standard does not have a material impact on the Group in 2009.