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Notes to the consolidated financial statements
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5.
FINANCE INCOME AND FINANCE EXPENSE
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2007 |
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2006 |
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2005 |
a |
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|
£m |
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|
£m |
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|
£m |
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|
|
|
|
|
|
|
|
|
|
|
|
Finance
expense
|
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|
|
|
|
|
|
|
|
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Interest
on listed bonds, debentures and notesb
|
|
|
623 |
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|
831 |
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|
963 |
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|
Interest
on finance leases
|
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|
44 |
|
|
62 |
|
|
68 |
|
|
Interest
on other borrowings
|
|
|
58 |
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|
20 |
|
|
19 |
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|
Unwinding
of discount on provisions
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3 |
|
|
3 |
|
|
3 |
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Net
charge on financial instruments in a fair value
hedgec
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– |
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– |
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– |
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Net
foreign exchange on items in hedging relationshipsd
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– |
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– |
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– |
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Fair
value movements on derivatives not in a designated
hedge relationship
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|
4 |
|
|
8 |
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|
– |
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Interest
on pension scheme liabilities
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1,872 |
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1,816 |
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1,720 |
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Total
finance expense
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2,604 |
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2,740 |
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2,773 |
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| a |
The
group adopted IAS 32 and IAS 39 from 1 April 2005.
For the 2005 financial year the group’s previous
accounting policies have therefore been applied
in calculating the recognition and measurement
basis for finance expense (see accounting policies).
|
| b |
Includes
a net charge of £67 million (2006: £41
million) relating to fair value movements on derivatives
recycled from the cash flow reserve. |
| c |
Includes
a net credit of £70 million (2006: net charge
of £71 million) relating to fair value movements
arising on hedged items and a net charge of £70
million (2006: net credit of £71 million)
relating to fair value movements arising on derivatives
designated as fair value hedges. |
| d |
Includes
a net credit of £420 million (2006: net charge
of £330 million) relating to foreign exchange
movements on hedged loans and borrowings and a net
charge of £420 million (2006: net credit of
£330 million) relating to fair value movements
on derivatives recycled from the cash flow reserve. |
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2007 |
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2006 |
|
|
2005 |
a |
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£m |
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|
£m |
|
|
£m |
|
|
|
|
|
|
|
|
|
|
|
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Finance
income
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|
|
|
|
|
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Income
from listed investmentsb
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|
7 |
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|
44 |
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47 |
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Other
interest and similar incomeb,c,d
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|
211 |
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|
154 |
|
|
209 |
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Net
foreign exchange on items in hedging relationshipse
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– |
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– |
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– |
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Expected
return on pension scheme assets
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2,292 |
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2,070 |
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1,918 |
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Total
finance income
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2,510 |
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|
2,268 |
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2,174 |
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Net
finance expense
|
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|
94 |
|
|
472 |
|
|
599 |
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| a |
The
group adopted IAS 32 and IAS 39 from 1 April 2005.
For the 2005 financial year the group’s previous
accounting policies have therefore been applied
in calculating the recognition and measurement
basis for finance income (see accounting policies).
|
| b |
Income
from listed investments and other interest and similar
income includes £45 million (2006: £37
million) relating to gains on held for trading investments. |
| c |
On 11
August 2005, the group exercised its option to require
early redemption of its US dollar convertible 2008
bond. Bondholders had the option to take redemption
proceeds in the form of cash or shares in the group’s
interest in LG Telecom. The majority of bondholders
exercised their option to take the redemption proceeds
in the form of LG Telecom shares. Other interest
in 2006 includes a net bond redemption gain of £27
million. This reflects the write off of LG Telecom
shares of £121 million and the associated
release from the available-for-sale reserve of £35
million; the write off of the bond and transaction
costs of £87 million and the associated option
liability of £17 million; and the release
from the translation reserve of £9 million
credit relating to foreign exchange movements on
the investment in LG Telecom to the date of disposal. |
| d |
The
2007 financial year includes £139 million
relating to interest on settlement of open tax matters
disclosed as a specific item (see
Specific items). |
| e |
Includes
a net charge of £123 million (2006: net credit
£85 million) relating to foreign exchange
movements on hedged investments and a net credit
of £123 million (2006: net charge £85
million) relating to fair value movements on derivatives
recycled from the cash flow reserve. |
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