Ann: FY23 Full-year results presentation, page-325

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 20233.3Financial assets and liabilitiesAccounting policyDerivative financial instrumentsThe Group holds derivative financial instruments to hedge its foreign currency risk exposure. The underlying principle of the Group's approach to managing foreign currency risk is to convert US dollar sales receipts to Australian dollars. Where there is a high degree of certainty over the US dollar sales receipts (sales within a three-month period), forward foreign exchange contracts are used to help manage the foreign currency exposure (committed hedging). Where there are longer-term US dollar sales receipts which are less certain (in respect of sales volume and selling price), the Group uses option contracts to protect a worst-case position (uncommitted hedging). The volume of hedging and mix of committed versus uncommitted instruments is determined using target return levels with these targets assessed regularly.Foreign currency option contractsOption contracts are considered to be cash flow hedges and are classified as financial instruments measured at fair value with movements in fair value recognised in Other Comprehensive Income (OCI).The Group designates option contracts as hedging instruments to hedge the variability in cash flows associated with highly probable forecast transactions arising from changes in foreign exchange rates. At inception of designated hedging relationships, the Group documents the risk management objective and strategy for undertaking the hedge. The Group also documents the economic relationship between the hedged item and the hedging instrument, including whether the changes in cash flows of the hedged item and hedging instrument are expected to offset each other.When a derivative is designated as a hedge instrument, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income (OCI) and is accumulated in the hedge reserve. The effective portion of changes in the fair value of the derivative that is recognised in OCI and any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.For all hedged transactions, the amount accumulated in the hedging reserve and the cost of hedging reserve is reclassified to profit or loss in the same period during which the hedged expected future cash flows would impact profit or loss.Foreign currency forward contractsForward foreign currency contracts are considered to be cash flow hedges and are classified asfinancial assets measured at fair value, with movements in fair value recognised through profit or loss.Investments in equity instrumentsInvestments in equity instruments are measured at fair value through profit or loss (FVTPL). However, on initial recognition only, an entity may elect to present in OCI, changes in the fair value.Financial assets held at fair value through other comprehensive income (FVOCI) If an irrevocable election has been made, the fair value gain or loss on the revaluation of an equity investment is recognised in OCI. The irrevocable election is made on an instrument by instrument basis and is not applicable to equity investments held for trading.Financial assets held at fair value through profit or loss (FVPL)This category comprises equity investments which are held for trading or where the above election to OCI has not been made. The financial assets are carried on the statement of financial position at fair value with changes in fair value or dividend income recognised in profit or loss.