Forward foreign exchange contracts
The Group utilises currency derivatives to hedge highly probable forecast transactions. The instruments purchased are denominated in the currencies of the Group's principal markets.
(a) Instruments applying hedge accounting
In 2018, the total notional amount of outstanding currency forward contracts that the Group has committed is £10.8 million (2017: £7.3 million). These contracts are to hedge against exchange rate movements on future sales and hedge accounting has been applied.
31 December 2018
£ Millions | Contract notional amount | Fair value asset |
| Forward foreign exchange contracts | | |
| Current portion | 10.8 | * |
| Total | 10.8 | * |
* Balances are less than £100,000.
31 December 2017
£ Millions | Contract notional amount | Fair value (liability) |
| Forward foreign exchange contracts | | |
| Current portion | 7.3 | (0.2) |
| Total | 7.3 | (0.2) |
Hedging instruments used in the Group's hedging strategy in 2018
| Carrying amount | Changes in fair value used for calculating hedge ineffectiveness | | |
|---|
| £ Millions | Contractual notional amount | Assets/
(Liabilities) | Financial statement
line item | Hedging instrument | Hedged item | Hedged ineffectiveness recognised in P&L# | Weighted average hedged rate | Maturity date |
| Cash flow hedge | | | | | | | | |
| Foreign exchange risk | | | | | | | | |
| Forward contracts to hedge highly probable transactions | 10.8 | * | Derivative
Financial
Instruments | * | * | – | EUR1:
US$1.1673 | January
2019 –
December
2019 |
* Balances are less than £100,000.
# All hedge ineffectiveness and costs of hedging are recognised in profit and loss within "exchange gains/loss".
(b) Instruments not applying hedge accounting
Certain currency forward contracts were taken up to protect against exchange rate movements on future purchases of goods. Hedge accounting has not been applied to these contracts.
The total notional amount and fair value asset/(liability) of these forward contracts are as follows:
December 2018
£ Millions | Assets | Liabilities |
|---|
Contract
notional
amount | Fair
value
asset | Contract
notional
amount | Fair value
(liability) |
| Forward foreign exchange contracts | | | | |
| Current portion | – | – | 15.0 | (0.2) |
| Total | – | – | 15.0 | (0.2) |
December 2017
£ Millions | Assets | Liabilities |
|---|
Contract
notional
amount | Fair
value
asset | Contract
notional
amount | Fair value
(liability) |
| Forward foreign exchange contracts | | | | |
| Current portion | 5.9 | 0.2 | 0.5 | – |
| Total | 5.9 | 0.2 | 0.5 | – |